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Structured Finance Litigation Blog

New York AG Amends Pleading to Intervene in $8.5 Billion Bank of America Settlement, Drops Claims against Trustee Bank of NY Mellon

Posted in Bank of America, Bank of New York Mellon, Countrywide Financial, Delaware Attorney General, New York Attorney General

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. In its most recent filing, however, the attorney general’s office has removed its affirmative counterclaims against the trustee, Bank of New York Mellon. A spokesman for Schneiderman’s office said that the attorney general has separated the affirmative claims from its intervention pleading, and will “pursue the state’s interest through every means available, including further investigation and litigation if necessary.”

The proposed settlement attempts to resolve nearly all of Bank of America’s legacy Countrywide-issued first-lien residential mortgage-backed securitization (RMBS) repurchase exposure, and involves 530 RMBS trusts with an original principal balance of $424 billion. The New York Attorney General, along with the Delaware Attorney General and a group of investors holding mortgage-backed securities tied to Countrywide mortgages, sought to intervene in the settlement on the basis that the proposed settlement represented only a fraction of the losses suffered by investors, and the terms of the settlement advanced Bank of New York Mellon’s own financial interests by shielding the trustee from liability and broadening its rights to indemnification for losses to investors. The Second Circuit recently remanded the dispute to state court, ruling that the settlement proceedings fell within the securities exception of the Class Action Fairness Act . The case is captioned In the matter of the application of BNY Mellon, et al., case number 651786-2011, in the Supreme Court for the State of New York, County of New York. Read the New York Attorney General’s amended pleading here.