Bank of America Corp.'s proposed settlement of mortgage-backed securities claims against its Countrywide unit would force private-label investors in 530 Countrywide trusts to accept the bank's $8.5 billion offer, B of A officials said Wednesday.
The deal centers on the approval of Bank of New York Mellon Corp., which is in charge of administering the securities trusts for investors. In what appears to be a substantially new role — trustees have vigorously argued that it is not their place to take action without a specific mandate from an individual trust's investors — Bank of New York Mellon has endorsed the settlement proposal.
"The trustee is front and center in this agreement," a B of A executive said on a conference call with analysts and reporters. "What they have filed with the courts is basically them saying, 'This is a good deal for investors.'"
Negotiations began nine months ago, when a group of powerful investors, including Pimco, BlackRock Inc., and the Federal Reserve Bank of New York, split from other investor groups to pursue a settlement with the help of the law firm Gibbs & Bruns. Other investors — ranging from the Federal Home Loan banks to coalitions of smaller mortgage-backed securities holders — have pursued litigation separately.
The settlement proposed on Wednesday would require the approval of a judge, and other investors will have an opportunity to argue for its rejection should they so choose.
The $8.5 billion agreement is part of a larger effort to put mortgage losses behind Bank of America. On the call, the bank noted that it was setting aside $14 billion in the second quarter to cover the cost of the settlement and other mortgage-related woes.