Bank of America (“BOA”) litigation woes continue and more claims are certainly on the horizon. BOA recently announced an $11.6 billion settlement with Fannie Mae and Freddie Mac. The settlement is in connection with its 2008 acquisition of mega mortgage lender Countrywide and the bad mortgages it issued. In order to lessen the blow to its bottom line, Countrywide will sell more than $800 million in mortgage servicing rights. This settlement will reduce its outstanding mortgage repurchase demands by more than 40%. The settlement includes $3.6 billion in case and $1.3 billion specifically for fees related to foreclosure delays. The plan also includes $6.7 billion for repurchasing loans. Of those loans, only $16 million were performing and $2.7 billion were modified and performing.
This settlement follows what has become commonly known as the “big bank settlement,” in which a group of megabanks agreed to pay more than $8 billion in restitution to Fannie Mae and Freddie Mac. That settlement involved allegations of many of the same type of financial chicanery in Bank of America’s most recent agreement. According to Peter Mougey, head of the Securities Department at Levin Papantonio, “although the settlement numbers appear large, they pale in comparison to the profits reaped by the banks from their reckless behavior.” “More importantly,” says Mougey, “investors in our nations pension funds and retirement accounts have lost billions because of the banks reckless behavior and they have only been held accountable for a small fraction.”
These two settlements are just the beginning of the fights that Bank of America will be having with regulators for years to come. Next on the agenda, a showdown at the MBIA.
James L. Kauffman is an associate attorney with the Pensacola, Florida, law firm of Levin, Papantonio, Thomas, Mitchell, Rafferty, & Proctor. He is a member of the Business Torts Department and his practice focuses primarily upon representing individuals and entities seeking financial recovery for losses suffered from securities fraud.