Group of 22 Investors Reach $8.5 Billion RMBS Settlement With BofA and Countrywide

Wednesday, June 29, 2011 - 14:51

Twenty-two investors have announced they have reached an $8.5 billion settlement with Bank of America and Countrywide regarding repurchase and mortgage servicing claims on 530 Countrywide-issued residential mortgage-backed securities (RMBS) for which BNY Mellon serves as the trustee. The settlement, which is subject to court approval, includes the following key terms:
►Payment by Bank of America and/or Countrywide of $8.5 billion to settle mortgage repurchase and servicing claims owned by the 530 covered trusts;
►Implementation of servicing changes and improvements that are expected to improve outcomes for borrowers and investors;
►The filing by BNY Mellon as trustee of a proceeding seeking court approval of the settlement; and
►An agreement by the investors to intervene in that proceeding and use their best efforts to obtain approval of the settlement.
"This settlement is a significant achievement for investors in private-label mortgage-backed securities," said lead counsel for the group of 22 investors, Kathy Patrick of the firm of Gibbs & Bruns LLP. "The $8.5 billion settlement payment is also in the best interest of the covered trusts. Our clients therefore requested that the trustee enter into the settlement and they intend to intervene in court to request that the Court approve it." 
The group of 22 investors who were awarded the $8.5 billion settlement includes: BlackRock Financial Management Inc.; Federal Home Loan Bank of Atlanta; the Federal Reserve Bank of New York's Maiden Lane entities; AEGON USA Investment Management LLC; Bayerische Landesbank; Goldman Sachs Asset Management LP; ING Investment Management LLC, ING Bank FSB and ING Capital LLC; Invesco Advisers Inc.; Kore Advisors LP; Landesbank Baden-Wuerttemberg and LBBW Asset Management (Ireland) PLC, Dublin; Metropolitan Life Insurance Company; Nationwide Mutual Insurance Company and its affiliate companies; Neuberger Berman Europe Limited; New York Life Investment Management LLC; Pacific Investment Management Company LLC (PIMCO); Prudential Investment Management Inc.; Teachers Insurance and Annuity Association of America; Thrivent Financial for Lutherans; Trust Company of the West and its affiliated companies controlled by The TCW Group Inc.; and Western Asset Management Company.
The settlement addresses more than mortgage repurchase claims, it also seeks improvements in mortgage servicing that will benefit both borrowers and investors in the long run. Bank of America has agreed to move the servicing of high-risk loans for troubled borrowers to qualified sub-servicing firms, at Bank of America's expense. The agreement also clarifies loss mitigation standards, improves servicing for borrowers and investors alike, and benchmarks Bank of America's servicing performance to industry norms. Bank of America has committed to pay agreed upon fees to the covered trusts if these servicing standards are not met on loans it continues to service.
“This is another important step we are taking in the interest of our shareholders to minimize the impact of future economic uncertainty and put legacy issues behind us,” said Bank of America Chief Executive Officer Brian Moynihan. “We will continue to act aggressively, and in the best interest of our shareholders, to clean up the mortgage issues largely stemming from our purchase of Countrywide.”

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