Recently, news broke that Bank of America aims to settle a lawsuit with displeased investors for $20 billion; of this $20 billion, $8.5 billion is set to go to investors who were deeply impacted by the troubled mortgage-backed securities through Countrywide Financial Corp. and Bank of America.
However, numerous bondholders, who are collectively calling themselves “Walnut Place,” are now expected to challenge the $8.5 billion settlement because they feel that it “may be unfair to other bond investors,” said The New York Times.
The article reports that court papers were filed Tuesday in the New York Supreme Court, saying that the bondholders had “serious concerns about the secret, non-adversarial, and conflicted way in which the proposed settlement was negotiated and about the fairness of the terms.”
“Far from being secretive, the conversations leading to the settlement have been publicly disclosed and widely reported,” Bank of America spokesman, Lawrence Grayson reportedly said.
This lawsuit is not the first one between Walnut Place and Bank of America, as they also sued the bank in February, in turn forcing Bank of America to buy back loans underlying $1.06 billion of securities it owns; Walnut Place believed that approximately 66 percent of the 2,166 investigated loans were misrepresented by Countrywide.
The settlement, which Walnut Place called “inadequate” will be reviewed on July 13 and may also require Bank of America to improve servicing operations. The hearing for the $8.5 billion settlement is currently set for November 17.
“Walnut Place, like every other investor, will have an opportunity to be heard,” said Kathy Patrick, lead lawyer for the 22 investors being reimbursed in the settlement, to The New York Times. “We believe that both in its amount and in its servicing improvements, the settlement is fair to the covered trusts.”