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Proposed $8.5B BofA Mortgage Settlement Returned to State Court

foxbusiness.comFeb 27, 2012

Bank of America Corp won a victory when a U.S. appeals court ruled that a proposed $8.5 billion settlement with investors in mortgage-backed securities should be reviewed in New York state court, not federal court.

Bank of America is seeking to resolve liabilities from its purchase of Countrywide Financial Corp in 2008. The settlement has been seen as a template for other banks to address claims by investors who bought risky pools of mortgages before the housing market collapsed.

The ruling, by the 2nd U.S. Circuit Court of Appeals on Monday, reverses an October decision by U.S. District Judge William Pauley taking the case from state court.

A return of the case to state court means it will be reviewed under a law that gives Bank of New York Mellon, the trustee that negotiated the settlement, broad discretion in matters such as agreements with investors.

"We dismiss the petition for lack of jurisdiction," Chief Judge Dennis Jacobs of the 2nd Circuit wrote in the decision.

Lawrence Grayson, a spokesman for Bank of America, the nation's second-largest bank, said in a statement that the Charlotte, North Carolina-based bank was pleased by the ruling.

"We believe the trustee acted reasonably in entering into the settlement agreement and we look forward to completing judicial proceedings to approve the decision," Grayson said.

Bank of New York Mellon and 22 institutional investors, including BlackRock Inc and MetLife, also wanted the settlement considered in New York state Supreme Court.

Other investors, led by a group called Walnut Place LLC, which was not part of settlement talks but would be bound by the terms, complained the $8.5 billion payout was too low and sought Manhattan federal court as the venue for the proceedings.

Walnut Place is a name used by Baupost Group, a Boston-based hedge fund run by Seth Klarman.

Attorney David Grais, who represents Walnut Place, did not immediately return a call for comment.

A Bank of New York Mellon spokesman was not immediately available for comment.

Bank of America shares rose 2 percent to $8.04 in late afternoon trading.

The case is Bank of New York Mellon v Walnut Place LLC et al, 2nd U.S. Circuit Court of Appeals, No. 11-4571.

Back to February 2012 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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