Bank of America Mortgage Settlement: Homeowners in Forclosure Lose; Investors with Shakey Funding Win

Posted on June 29, 2011


A settlement was announced today in the class action suit against Bank of America:

In the largest settlement to date related to the rogue mortgage lending wave, Bank of America said Wednesday it would pay $8.5 billion to settle claims with investors holding about $100 billion worth of mortgage-related securities sold by its Countrywide unit. The winners include 22 large investors such as Pimco, Metropolitan Life and BlackRock, as well as the Federal Reserve Bank of New York.

Aside from their claims that Countrywide sold them bonds backed by faulty loans, the investors argued that by continuing to service bad loans rather than speeding up foreclosures, the Bank of America unit ran up servicing fees, profiting at the expense of investors.

As a result the settlement includes a promise to hire additional “subservicers” to speed up the foreclosure process for high-risk loans. That means Bank of America borrowers whose foreclosure have been on hold may now see the process accelerated.

“Living with the uncertainty of foreclosure can’t be a pleasant experience,” said Bank of America spokesman Jerry Dubrowski. “The sooner we can deal with that overhang the better for the economy.”

Bank of America also faces considerable uncertainty as it continues to try put its mortgage woes behind it.

While the bank said its settlement would resolve “nearly all” its exposure related to mortgages issued by Countrywide, only holders of about a quarter of the securities have agreed to support the deal. Hundreds of investors holding an additional $300 billion worth of securities have yet to agree to the settlement, which also is subject to court approval. There are no guarantees that the remaining investors will go along.

“It is not possible to predict whether and to what extent challenges will be made to the settlement or the timing or ultimate outcome of the court approval process,” Bank of America said in its press release announcing the settlement.

Story: BofA to pay $8.5B housing crash settlement [NBC]

So investors who willingly made bad investments will be reimbursed.  And it looks as if no one in the Bank’s corporate hierarchy will spend any time either in jail or in returning lost funds to customers.  Where is the justice in this?  When has anyone been rewarded for making a bad investment.  And that last bit saying people waiting for the other shoe to drop in their foreclosure process would be relieved, what kind of logic is that when most are moving heaven and earth to stay in their homes.

This entire affair needs to be investigated.

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