Bank of America has lowered its reserves established for payments in response to mortgage buy-back demands. The announcement, coming in the banking giant’s quarterly earnings report, indicates BofA set aside less money in the first quarter of 2012 to cover the cost of “repurchase” demands than it had at any time since the housing bust.
At a hearing on April 24, 2012, New York state Supreme Court Justice Barbara R. Kapnick denied a motion to convert Bank of America’s proposed $8.5 billion mortgage-bond settlement from an Article 77 proceeding to a plenary hearing. Objectors to the proposed settlement, including AIG, moved to convert the case from an Article 77 proceeding – which is limited in scope and generally reserved for routine trust matters – into a plenary action for a full, adversarial hearing. Justice Kapnick denied the motion.
As most correspondents/originators are now painfully aware, aggregator banks are unleashing a barrage of “repurchase” or “make whole” claims related to loans sold by the correspondent years ago. The aggregators cite supposed loan level breaches of representations and warranties in the applicable mortgage purchase and sale agreement or in the correspondent/originator guidelines.
On April 10, 2012, New York Attorney General Eric Schneiderman filed an amended pleading to intervene in Bank of America’s proposed 8.5 billion mortgage-bond settlement. In the amended pleading, Schneiderman’s office argues, as it did in its initial pleading, that the settlement is an unfair and inadequate resolution of investors’ claims against Bank of America.
On April 3, 2012, a federal judge dismissed the majority of claims in a putative class action that accused The Bank of New York Mellon (BNY Mellon) of failures in its oversight of mortgage-backed securities trusts. The lawsuit, filed by four pension funds in August 2011, relates to pools of mortgages that Countrywide, a Bank of America unit, sold into trusts.