The Real Deal New York

Plot thickens in BofA mortgage practices settlement

February 04, 2013 02:00PM

Bank of America CEO Brian Moynihan

A proposed $8.5 billion deal by Bank of America to settle claims of mortgage abuses by Countrywide Financial, which the bank bought in 2008, is in jeopardy as a new lawsuit alleges that those abuses continued after Countrywide was acquired, the New York Times reported. Three Federal Home Loan Banks, in Boston, Chicago and Indianapolis, and Triaxx, a collateralized debt obligation fund, brought the suit, filed Friday in state Supreme Court in Manhattan.

The filing contends that Bank of America failed to buy back certain mortgages it modified, which may constitute a violation of its agreements with investors who bought mortgage-backed securities from them, the Times said. The bank allegedly failed to modify second mortgages on properties where it held the first and second mortgages, despite the fact that first mortgage lenders would not generally take the first hit.

Bank of America “may have engaged in self-dealing and other misconduct, including in connection with modifications to first lien loans held by the Trusts where BofA or Countrywide held second lien loans on the same subject properties,” the suit reads.

A spokesperson for Bank of America fired back — “modifying mortgages for homeowners in severe distress is critical to the ongoing economic recovery,” he told the Times. “It is difficult to see how federally regulated entities like the Federal Home Loan Banks would seek to attack that practice which helps families to stay in their homes and in no way violated the contracts at issue.” [NYT] –Guelda Voien

One Response to “Plot thickens in BofA mortgage practices settlement”

  1. February 20, 2013 at 2:29 am, top said:

    This is very disturbing considering the number of mods they have actually approved compared to applied .there is no shortage. Of people who are much worse off as when they entered mod then are denied for BS reasons .I am leaving here to find out who is on house committee that could not find wrong doing they are not our friends.

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