Soured Housing Loan Puts Bank of America in Bad Taste
From approximately $46 billion in October 2010 that Bank of America has owed to bondholders suing the firm over its embattled housing loan securities, the amount rose overnight to $84 billion when another group of investors stepped into the unfolding controversies drowning BofA.
Bank of New York Mellon Corp., the trustee of the debt, is also implicated in the case.
Fresh from conceding to a $10 million settlement with the Securities and Exchange Commission over charges of data mismanagement and clandestine trading fees filed against acquired bank Merrill Lynch, BofA is facing again an added burden after a group of insurers, investment managers and banks, joined the housing loan dispute, according to a Bloomberg report quoting Kathy Patrick, partner at Houston-based Gibbs & Bruns LLP, who represents the investors in the case.
Last week, Bank of America’s Countrywide Financial Corp., with its former outside auditing firm KPMG, had won a Los Angeles court approval reducing its settlement with investors suing for losses from the housing loan securities fraud, from the original $624 million to $601.5 million.
However, the Michigan public retirement funds claiming $65 million in housing loan losses, Oregon funds claiming another $14 million in losses, and a Fresno retirement fund in California, refused to concede to the settlement and filed new charges.
But New York funds lawyer Joel Bernstein was reported to have said during a hearing that the housing loan fraud could have cost BofA a whooping $2.8 billion in total compensation to its investors had the case proceeded.
In October, there were 115 complaints suing BofA for housing loan damages, which included Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York. Now the number has risen to 225.
Added to this is another suit filed on February 25 by David Grais, a New York-based lawyer who deals with the more than $700 million housing loan fraud charges in court filed by another group of investors against Bank of America.
However, Bank of America spokesperson Jerry Dubrowski raised doubts over the validity of the allegations.
“The amount of unpaid principal balance doesn’t reflect what ultimately might be paid if, in fact, there were valid claims,” he said.
Dubrowski further questions the qualifications of investors who are claiming losses from the housing loan securities.