Of Special Interest


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8th July 2011

Challenge to BoA Mortgage settlement takes shape

The group of investors who purchased Retail Mortgage Backed securities from Bank of America and who are against the settlement negotiated of around $8.5bn have now got a name and have filed a challenge in the court. The group are called the Walnut Place investors and own more than one quarter of the voting rights in one of the Countrywide trusts. Many of the problem bonds were issued by Countrywide, the mortgage company that was bought by Bank of America just as the sub-prime market problems were escalating and despite there being many market concerns over its underwriting.

The settlement was negotiated by Bank of New York Mellon as trustee for the issues. The filing accuses BNY Mellon of putting its own interests ahead of investors. It also claims that two thirds of the loans contained in two Countrywide trusts failed to meet the underwriting guidelines. if this same ratio was extrapolated to the other trusts then the unpaid principle balances may exceed $240bn. The investors argue that in the circumstances BoA should be forced to buy back the securities.