Bank of America says a settlement deal Taylor, Bean & Whitaker Mortgage Corp. struck last month could impede creditors owed $1.75 million from pursuing potentially valuable lawsuits.

In papers filed with the U.S. Bankruptcy Court in Jacksonville, Fla., Bank of America said holders of notes issued by a Taylor Bean subsidiary, which it represents as an indentured trustee, may have claims against Wells Fargo & Co. and other entities shielded from legal action under the proposed $90.7 million settlement deal.

"The scope of the proposed releases is so far reaching that it would include, without limitation, a release of all claims for fraudulent transfers received by Wells Fargo," Bank of America said in court papers filed last week.

Bank of America is asking for the court to block Taylor Bean from entering into the settlement that the failed mortgage lender struck with Wells Fargo, trusts holding mortgage-backed securities and its creditors.

Bank of America said it believes valuable assets were transferred from the Taylor Bean subsidiary to Wells Fargo. Bank of America wants the right to pursue lawsuits that would wrest back those assets.

Those lawsuits could result in a larger recovery for the creditors Bank of America represents.

The proposed settlement would resolve claims tied to mortgage loans held by 12 separate trusts.

Under Wells Fargo's supervision, Taylor Bean was the loan servicer for the loans until Freddie Mac stripped Taylor Bean of its authority to perform that role amid allegations of fraud in August 2009.

That move prompted the Ocala, Fla., mortgage lender to shut down its lending operations and seek Chapter 11 protection.

As the loan servicer, Taylor Bean was required to advance payments of loan principal, interest, property taxes and insurance premiums when the borrowers were delinquent on their payments.

The company is seeking to recoup more than $100 million in those advanced payments.

On the other hand, Wells Fargo and the trusts say they are owed more than $10 million because Taylor Bean breached its contract to provide loan servicing on the account of actions taken by Freddie Mac.

The two sides agreed to allow their claims to offset, meaning Taylor Bean's bankruptcy estate would net $90.7 million from the settlement deal.

But the deal also grants legal protections to Wells Fargo and others.

"There is no basis…for the court to approve the proposed releases and injunctions set forth in the settlement agreements," Bank of America said.

Taylor Bean, in its request to enter into the settlement agreement, however, said the deal is fair and in the best interests of its creditors.

"Without such a resolution, the debtor would be forced to expend significant resources on protracted litigation, thereby diminishing the ultimate distribution to creditors," the lender said.

Once one of the biggest U.S. mortgage lenders, Taylor Bean collapsed in 2009 after federal regulators and the FBI raided the firm's offices. Federal prosecutors say the company was at the center of a multibillion-dollar mortgage fraud.

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