7/21/2011
A report from the Wall Street Journal has revealed that the proposed $8.5 billion deal of Bank of America with investors who purchased subprime mortgages by way of the bank’s Countrywide Financial subsidiary is being challenged by a group of 11 mortgage-bond investors.
Calling their group Walnut Place, who at this point remained anonymous, filed a legal challenge in New York County Supreme Court attacking the fairness of the deal.
The group stated in the court filing, “Walnut Place has serious concerns about the secret, non-adversarial, and conflicted way in which the proposed settlement was negotiated and about the fairness of the terms of the proposed settlement.”
The court filing marks the first official legal challenge against what would have been the banking industry’s biggest single settlement arising from the housing market crash of 2008. On June 29, Bank of America agreed to a $14 billion settlement with disillusioned investors who bought unsound subprime mortgages by way of the bank’s Countrywide Financial subsidiary.
Walnut Place seems to only have challenged the $8.5 billion allotted to a set of larger investors led the Pacific Investment Management Co. or PIMCO, BlackRock, and the Federal Reserve Bank of New York.
The filing highlighted three main objections to the proposed settlement of the Bank of America. The first is over the amount of the proposed deal, the second is the alleged serious conflict of interests and the third is regarding the non-adversarial and secretive nature of the settlement negotiations. Walnut Place also singled out the trustee for the bondholders of Bank of America, the Bank of New York Mellon, for the most criticism.
