Articles Posted in Bank of America

Merrill Lynch Told to Pay $3.6M to Brazilian Heiress for Brother’s Alleged $389M in Unauthorized Trading

Published on: September 22, 2012 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority panel is ordering Merrill Lynch (MER), a Bank of America Corp. (BAC) unit, to pay $3.6 million to a Brazilian heiress who contends that she lost millions of dollars because of unauthorized trades that her brother made in her account. The securities arbitration case was submitted on behalf of Sophin Investments SA, which was established to manage Camelia Nasser de Kassin’s inheritance from a relative.

Sophin contended that Merrill allowed Camelia’s brother, Ezequiel Nasser, to make unauthorized trades worth $389 million using her accounts at two Merrill Lynch units. He allegedly invested in high risk securities, including naked puts in Lehman Brothers and Bear Stearns (BSC) that created a deficit of at least $8 million.

The plaintiff claimed inadequate supervision, civil fraud, unauthorized trading, and other alleged wrongdoings, and asked for compensatory damages of $21 million for the $9.5 million that had been placed in the accounts, $9.5 million as an investment return, and the rest for commissions that went to Merrill. The financial firm then submitted a counterclaim alleging that their contract together had been breached. It asked the FINRA panel for almost $2.5 million in damages for the deficit in Sophin’s retail account and close to $3 million for the swap account. Merrill also filed claims against Marc Bonnant, who is the lawyer who set up the accounts on Sophin’s behalf, as well as against Ezequiel.

The FINRA panel found both Sophin and Merrill liable. While it told Merrill to pay $6.1 million in compensatory damages to Sophin, the latter was told to pay the financial firm $2.5 million-hence the $3.6 million that Merrill was ultimately ordered to pay Sophin. Also, while the panel acknowledged that Bonnant paid less than adequate attention to his fiduciary duties to Sophin, it said that Merrill exhibited “lapses” in hits own supervising and record keeping.

The claims made against Ezequiel Nasser by Merrill were denied. The arbitration panel said Bonnant, who has been based in Europe, isn’t under its jurisdiction. (Merrill has accused him of authorizing the trades that it had made for Sophin and misrepresenting the client’s investment experience, financial state, and tolerance for risk.)

This case is just one aspect of the bigger dispute between Merrill Lynch and members of the Nasser banking family over alleged trading losses. For example, in 2008, the financial firm sued the Nassers for huge trading losses that result in a $99 million judgment. A New York appeals court upheld that ruling.

Unauthorized Trades
A broker or advisor has to get an investor’s permission to sell or buy securities for an investor. Otherwise, the trade is not authorized. When “trading authorization” is obtained to sell or buy in that client’s account, trades can be made without getting in touch with the client. However, this is a limited power of attorney.

Unfortunately, many investors suffer losses because of unauthorized trades.

Merrill Lynch must pay $3.6 million to Brazilian banking heiress, Merrill Lynch, Reuters, September 12, 2012

Merrill Lynch Ordered to Pay $3.6 Million to Brazilian Heiress, Wall Street Journal, September 12, 2012

Bonnant V. Merrill Lynch (PDF)

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Shepherd Smith Edwards and Kantas LLP Pursue Securities Fraud Cases Against Merrill Lynch, Pierce, Fenner, & Smith, Purshe Kaplan Sterling Investments, and First Allied Securities, Inc., Stockbroker Fraud Blog, May 10, 2012

Merrill Lynch Agrees to Pay $40M Proposed Deferred Compensation Class Action Settlement to Ex-Brokers, Stockbroker Fraud Blog, August 27, 2012

Shepherd Smith Edwards and Kantas LLP Pursue Securities Fraud Cases Against Merrill Lynch, Pierce, Fenner, & Smith, Purshe Kaplan Sterling Investments, and First Allied Securities, Inc., Stockbroker Fraud Blog, May 10, 2012 Continue Reading ›

Merrill Lynch Agrees to Pay $40M Proposed Deferred Compensation Class Action Settlement to Ex-Brokers

Published on: August 27, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Merrill Lynch (MER) has arrived at an “agreement in principle” to resolve the class action lawsuit filed by John Burnette and Scott Chambers over deferred compensation that they contend that the brokerage firm refused to pay them after it merged with Bank of America (BAC) in 2008 and they left its employ. About 1,400 brokers are part of this class. However, some 3,300 ex-Merrill brokers have submitted deferred compensation claims against the brokerage firm for the same reason.

Merrill had refused to give these employees their deferred compensation, which is what a broker usually gets paid for staying with a financial firm for a specific number of years, when they resigned after the merger. These brokers, however, cited “good reason” for their departure, which is another cause they can claim to receive this.

The class action settlement was presented to U.S. District Judge Alison Nathan at Manhattan federal court on Friday. She will decide whether to approve it, as well as certify the class according to the parties’ definition. However, it is not known at this time how many brokers will go for this settlement if it is approved.

It is not unusual for many to opt not to be part of a class action settlement and instead seek to obtain more money via an individual arbitration claim. Having an arbitration lawyer personally representing your case generally leads to bigger results. Already, over a thousand ex-Merrill brokers have filed their FINRA claims. Also, for an ex-Merrill broker whose deferred compensation was above six figures, they are likely to get much less by going the class action route. Meantime, ex-Merrill brokers with revenues that exceeded $500,000 during a certain timeframe before they left the financial firm cannot participate in a class action settlement. Neither can those that accepted bonuses and waived certain rights related to deferred compensation claims from Merrill after the deal with Bank of America.

That said, even the ex-Merrill brokers that decide to opt out of the class are likely to benefit from this settlement because it establishes a floor for payouts while serving as Merrill’s public acknowledgement that it had a financial duty to pay the former brokers upon their departure.

Under the class action settlement, the majority of advisers would get 40-60% of the value of their account. According to OnWallStreet.com, for a broker to receive 60%, advisors must have already made a request for reimbursement, whether via lawsuit, arbitration, or some other way and left the financial firm prior to January 30, 2010. To be eligible to receive 50%, these advisers too will have had to have made some type of legal action and resigned by June 30, 2010. If no action was taken, and the former broker still wants to opt in, they would turn in a form and seek 40% of compensation–dependent upon when they exited the firm. Other ex-advisors might also be able to receive 40 to 60% of payment depending on when they left Merrill, whether they had filed a deferred compensation claim, and in what compensation plans they were participants. Ex-dvisers that had an agreement with the Advisor Transition Program, however, would not be able to participate.)

Merrill to Make Good on Former Brokers’ Deferred Comp, On Wall Street, August 24, 2012
Merrill to pay $40 mln in deferred compensation suit, Reuters, August 25, 2012

More Blog Posts:
Merrill Lynch to Pay Brokers Over $10M for Alleged Fraud Over Deferred Compensation Plans, Institutional Investor Securities Blog, April 5, 2012

Advanced Equities Ordered by FINRA Arbitration Panel to Pay $4.5M to Ex-Broker, Stockbroker Fraud Blog, June 12, 2012

Claims Continue over MasterShare – Prudential Securities’ Deferred Compensation Plan, Stockbroker Fraud Blog, August 13, 2008 Continue Reading ›

Bank of New York Mellon Corp. Must Contend with Pension Fund Claims Over Countrywide Mortgage-Backed Securities

Published on: April 10, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. District Court for the Southern District of New York has decided that investors can sue Bank of New York Mellon (BK) over its role as trustee in Countrywide Financial Corp.’s mortgage-backed securities that they say cost billions of dollars in damages. While Judge William Pauley threw out some of the clams filed in the securities fraud lawsuit submitted by the pension funds, he said that the remaining ones could proceed. The complaint was filed by the Benefit Fund of the City of Chicago, the Retirement Board of the Policemen’s Annuity, and the City of Grand Rapids General Retirement System. The retirement board and Chicago’s benefit fund hold certificates that 25 New York trusts and one Delaware trust had issued, and BNY Mellon is the indentured trustee for both. Pooling and servicing agreements govern how money is allocated to certificate holders.

In Retirement Board of Policemen’s Annuity and Benefit Fund of City of Chicago v. Bank of New York Mellon, the plaintiffs are accusing BNYM of ignoring its responsibility as the investors’ trustee. They believe that the bank neglected to review the loan files for mortgages that were backing the securities to make sure that there were no defective or missing documents. The bank also allegedly did not act for investors to ensure that loans having “irregularities” were taken from the mortgage pools. As a result, bondholders sustained massive losses and were forced to experience a great deal of uncertainty about investors’ ownership interest in the mortgage loans. The plaintiffs are saying that it was BNYM’s job to perfect the assignment of mortgages to the trusts, certify that documentation was correct, review loan files, and make sure that the trust’s master servicer executed its duties and remedied or bought back defective loans. Countrywide Home Loans Inc. had originally been master servicer until it merged with Bank of America (BAC).

The district court, in granting its motion, limited the lawsuit to the trusts in which the pension fund had interests. It also held that the fund only claimed “injury in fact” in regards to the trusts in which it held certificates. The court found that the certificates from New York are debt securities and not equity and are covered under the Trust Indenture Act. The plaintiffs not only did an adequate job of pleading that Bank of America and Countrywide were in breach of the PSAs, but also they adequately pleaded that defaults of the PSAs were enough to trigger BNYM’s responsibilities under Sections 315(b) and (c). The court, however, threw out the claims that BNYM violated Section 315(a) by not performing certain duties under the PSAs and certain other agreements.

BNYM says it will defend itself against the claims that remain.

Bank of NY Mellon must face lawsuit on Countrywide, Reuters, April 3, 2012

Judge Rejects Bank Of NY Mellon Motion To Dismiss Countrywide Suit, Fox, April 3, 2012

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Credit Suisse Group AG Must Pay ST Microelectronics NV $431 Million Auction-Rate Securities Arbitration Award, Stockbroker Fraud Blog, April 5, 2012

Citigroup to Pay $285M to Settle SEC Lawsuit Alleging Securities Fraud in $1B Derivatives Deal, Institutional Investor Securities Blog, October 20, 2011

Wirehouses Struggle to Retain Their Share of the High-Net-Worth-Market

Published on: April 6, 2012 | by Shepherd Smith Edwards & Kantas, LLP

With their share of the high-net-worth-market expected to drop down to 42% in 2014 from the 56% peak it reached five years ago, wirehouses are looking to regain their grip. According to Cerulli Associates, Bank of America Merrill Lynch (BAC), Wells Fargo (WFC), Morgan Stanley Smith Barney (MS), and UBS (UBS)—essentially, the largest financial firms—will see their portion of the high-net-worth market continue to get smaller. Meantime, because private client groups can now be called the largest high-net-worth services provider, they can expect their hold to continue as they likely accumulate about $2.8 trillion in high-net-worth assets in two years—a 49% market share.

The Cerulli report says that the wirehouses’ reduced share of the market can be attributed to a number of factors, including the fact that high-net-worth investors are allocating their wealth to several advisors at a time. Also, during the economic crisis of 2008, many investors transferred some assets out of the wirehouses. There were also the wirehouse advisers that chose to go independent or enter another channel. In many cases, these advisors’ clients ended up going with them.

The private client groups are the ones that have benefited from this shift away from wirehouses. A main reason for this is that they are considered safer for both advisors that wanted a change and investors who were seeking lower risks.

Also, per the report, there has been healthy growth in the independent advisor industry. The registered investment advisor/multi-family offices grew their assets under management by 18% two years ago. Meantime, during this same time period, wirehouses assets only grew by 2%.

In other wirehouse-related news, beginning summer, ERISA Section 408(b)(2) ‘s new point-of-sale fee disclosure rules will make it harder for these firms to up the fees they charge investors. According to AdvisorOne, as a result, these firms are raising the fees that they charge mutual fund companies instead.

Wirehouses and mutual fund companies usually have a revenue sharing agreement. In exchange for investing their clients’ money in a mutual fund, a wirehouse charges the mutual fund company a fee (this is usually a percentage of every dollar that the client invests). However, in the wake of the upcoming disclosure changes, financial firms have started raising that fee.

For example, according to The Wall Street Journal, at the start of the year, UBS approximately doubled the rate that mutual funds must now pay. The financial firm is seeking up to $15 for every new $10,000 that a clients invests in a mutual fund. Moving forward, this will go up to $20 annually. Morgan Stanley’s new raised rate is $16 a year. It used to charge $13 for stock funds and $10 for bond funds.

Wirehouses are saying that since its the brokerage firms and not the individual financial adviser who gets the separate payment streams, the rate won’t impact the judgment of an adviser when it comes to selecting funds. Such fees paid by mutual funds can impact a financial firm’s bottom line. For example, last year, almost a third of Edward Jones’s $481.8 million in profits came from mutual fund company fees.

Wirehouses Battle to Keep Market Share, On Wall Street, March 28, 2012

FINRA Bars Registered Representatives Accused of Securities Misconduct and Negligence, Stockbroker Fraud Blog, April 5, 2012

Bank of America Subpoenaed by Massachusetts Over Bryn Mawr CLO II Ltd. and LCM VII Ltd. CLOs that Cost Investors $150 Million

Published on: February 14, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Massachusetts securities regulator William Galvin is subpoenaing Bank of America Corp. over two collateralized loan obligations that led to investors to lose $150 million. Galvin is trying to determine whether the financial firm knew it was overvaluing the portfolios’ assets so it could remove the loans from its books.

The state is looking to obtain records and documents from Banc of America Securities LLC related to two CLOs-Bryn Mawr CLO II Ltd. and LCM VII Ltd-that were sold in 2007. (Merrill Lynch and Bank of America Securities joined forces in 2008 when they were merged in an acquisition).

It was in 2006 that Bank of America had about $400 million of commercial loans from small banks. The following year, loans were put together as securities packages that were bought by investors.

Galvin has been taking a hard look at the way banks structured and sold debt products-especially mortgage-backed securities-leading up to the 2008 economic collapse. Galvin says his office is also interested in taking a closer look at other entities.

Massachusetts’ subpoena on Friday comes a day after Bank of America, Citigroup Inc., Wells Fargo & Co., JP Morgan Chase & Co., and Ally Financial Inc. agreed to settle for $25 billion allegations accusing them of engaging in abusive mortgage practices. The agreement was reached with federal agencies and 49 states (not Oklahoma) and is considered the largest federal-state settlement ever. All five banks will also pay the Federal Reserve $766.5 million in penalties.

The deal resolves allegations that the banks robo-signed thousands of foreclosure documents without properly reviewing the paperwork, engaged in deceptive practices when offering loan modifications, did not offer other options prior to closing on borrowers who had mortgages that were federally insured, and submitted improper documents in bankruptcy court.

Also as part of this securities settlement, Bank of America will pay $1 billion to settle a separate probe into allegations that it and its Countrywide Financial unit engaged in wrongful and fraudulent conduct. The $25B settlement is designed to provide mortgage relief and give $2,000 to about 750,000 borrowers whose homes ended up foreclosing after home values dropped 33% from what they were worth in 2006.

Per other terms of the settlement, the bank is to provide $17 billion in loan modification and principal reduction to delinquent borrowers whose homes are at risk of foreclosure. $3 billion is included for borrowers that are up-to-date on mortgage payments but cannot refinance because they owe more than what their home is worth. The banks have also agreed to new servicing standards.

Massachusetts Subpoenas Bank Of America Over CLOs, Fox Business, February 10, 2012
U.S. banks agree to $25 billion in homeowner help, Reuters, February 9, 2012

More Blog Posts:
FDIC Objects to Bank of America’s Proposed $8.5B Settlement Over Mortgage-Backed Securities, Stockbroker Fraud Blog, August 30, 2011
Mortgage-Backed Securities Lawsuit Against Bank of America’s Merrill Lynch Now a Class Action Case, Stockbroker Fraud Blog, June 25, 2011
Bank of America to Pay $335M to Countrywide Financial Corp. Borrowers Over Allegedly Discriminating Lending Practices, Institutional Investor Securities Blog, December 21, 2011 Continue Reading ›

Bank of America to Pay $335M to Countrywide Financial Corp. Borrowers Over Allegedly Discriminating Lending Practices

Published on: December 21, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Bank of America Corp. has agreed to a record $335 million settlement to pay back Countrywide Financial Corp. borrowers who were billed more for loans because of their nationality and race, while creditworthiness and other objective criteria took a back seat. All borrowers that were discriminated against qualified to receive mortgage loans under Countrywide’s own underwriting standards.

The settlement is larger than any past fair-lending settlements (totaling $30M) that the US Justice Department has been able to obtain to date. Countrywide was acquired by Bank of America in 2008.

According to the Justice Department, Countrywide charged higher fees and interest rates to over 200,000 Hispanic and black borrowers while directing minorities to more costly subprime mortgages despite the fact that they qualified for prime loans. Meantime, the latter were given to non-Hispanic white borrowers who had similar credit profiles.

Bank of America’s Merrill Lynch Settles for $315 million Class Action Lawsuit Over Mortgage-Backed Securities

Published on: December 6, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Bank of America, Corp. has agreed to pay investors $315 million to settle their class action claim accusing Merrill Lynch of misleading them about the risks involved in investing in mortgage-backed securities. If approved, the proposed settlement would be one of the largest reached over MBS that caused investors major losses when the housing market collapsed. The lead plaintiff in this securities case is the Public Employees’ Retirement System of Mississippi pension fund.

The class action lawsuit accused Merrill of misleading investors about $16.5 billion of MBS in 18 offerings that were made between 2006 and 2007. They are claiming possible losses in the billions of dollars. (The offerings occurred before Bank of America bought Merrill.)

The plaintiffs contend that Merrill’s offering documents were misleading. They also believe that the original investment-grade ratings for the securities, which had been backed by loans from Countrywide, IndyMac Bancorp Inc., First Franklin Financial unit, and New Century Financial Corp. were unmerited. Most of these investments were later downgraded to “junk” status.

By agreeing to settle, Bank of America is not admitting to or denying wrongdoing.

This settlement must be approved by US District Judge Jed Rakoff, who just last week rejected the proposed $285M securities settlement between Citigroup Global Markets Inc. and the Securities and Exchange Commission. He ordered that the case be resolved through trial. Rakoff was also the one who refused to approve another proposed Bank of America securities settlement—the one in 2009 with the SEC—for $33 million over misstatements that were allegedly made regarding the purchase of Merrill. Rakoff would later go on to approve the revised settlement of $150 million.

Rakoff has criticized a system that allows financial firms to settle securities fraud allegations against them without having to admit or deny wrongdoing. He also has expressed frustration at the “low” settlements some investment banks have been ordered to pay considering the amount of financial losses suffered by investors.

Our securities fraud lawyers represent individual and institutional clients that sustained losses related to non-traded REITs, private placements, principal protected notes, auction-rate securities, collateralized debt obligations, mortgage-backed securities, reverse convertible bonds, high yield-notes and other financial instruments that were mishandled by broker-dealers, investment advisers, or their representatives. We also work with victims of Ponzi scams, affinity scams, elder financial fraud and other financial schemes.

BofA Merrill unit in $315 mln mortgage settlement, Reuters, December 6, 2011

Public Employees’ Retirement System of Mississippi

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California Investigating Whether Bank of America & Countrywide Financial Used False Pretenses to Sell Mortgage-Backed Securities to Investors

Published on: October 22, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Not long after bowing out of talks over a possible $25 billion dollar settlement between state and federal officials and the country’s largest banks (including Bank of America Corp, Citigroup, and JP Morgan Chase & Co.) over alleged foreclosure abuses, California’s Attorney General’s office has subpoenaed BofA as part of its investigation into whether it and subsidiary Countrywide Financial employed false pretenses to get private and institutional investors to purchase risky mortgage-backed securities. By walking out of the negotiations on the grounds that the banks weren’t offering a big enough settlement, the state of California has given itself the option of arriving at a larger settlement.

California Attorney General Kamala D. Harris has called the proposed settlement “inadequate” for the homeowners in her state. She has also has set up a mortgage fraud strike force tasked with investigating all areas of mortgage fraud.

Countrywide is credited with playing a role in the housing boom and its later collapse because of subprime loans it gave clients with poor/no credit histories, mortgages that let borrowers pay such a small amount that their loan balances went up instead of down, and “liar” loans that were issued without assets and income being confirmed. Also, a lot of the most high-risk loans were bundled up to support private-label securities that became highly toxic for investors and banks.

Meantime, Federal and state officials are trying to get California to rejoin the larger talks. Just this week, they presented the possibility of helping troubled creditworthy owners refinance their loans. California’s involvement is key for any deal because the state so many borrowers that owe more than the value of their homes, are in foreclosure, or are running behind on mortgages.

New York, too, has backed out of the group—a move that proved to be another blow for negotiations, as well as for the Obama Administration. Officials from other states, such as Nevada, Delaware, Minnesota, Massachusetts, and Kentucky, have also expressed worry about the breadth of the settlement and whether all potential misconduct has been investigated.

With its acquisition of Countrywide in 2008, BofA has sustained high losses over settlements as a result of its subsidiary’s loans. According to the Los Angeles Times, these settlements include:

• A promise to forgive up to $3 billion in principal for Massachusetts Countrywide borrowers
• $600 million to former Countrywide shareholders
• Billions of dollars to Freddie Mac and Fannie Mae over buybacks of bad home loans
• $8.5 billion to institutional investors over the repurchase of Countrywide mortgage-backed bonds
• $5.5 billion reserved for mortgage bond investors with similar claims

California reportedly subpoenas BofA over toxic securities, Los Angeles Times, October 20, 2011

California Pulls Out of Foreclosure Talks, Wall Street Journal, October 1, 2011

More Blog Posts:
$63 Million Mortgage-Backed Securities Lawsuit Against Bank of America is Second One Filed by Western and Southern Life Insurance Co. Against the Financial Firm, Institutional Investor Securities Blog, August 29, 2011

Federal Home Loan Banks Say Countrywide Financial Corp Mortgage Bond Investors May Be Owed Way More than What $8.5B Securities Settlement with Bank of America Corp. is Offering, Institutional Investor Securities Blog, July 22, 2011

Bank of America and Countrywide Financial Sued by Allstate over $700M in Bad Mortgaged-Backed Securities, Stockbroker Fraud Blog, December 29, 2010

Nevada Attorney General Goes After Bank of America for Allegedly Violating Countrywide Fraud Settlement

Published on: September 8, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Nevada Attorney General Catherine Cortez Masto is accusing Bank of America of violating its fraud settlement regarding Countrywide Financial Corp. She is asking the court to “terminate our consent judgment” because she says the violation is “such a material breach.”

Masto claims that instead of honoring the terms of their agreement, Bank of America has:

• Continued to take part in fraudulent activities that allow contracts to stay in place
• Gone back on its promise to lower interest rates when revising the loans of buyers in trouble and instead has raised them.
• Failed to give qualified homeowners the promised loan modifications
• Proceeded with foreclosures even though modification requests by borrowers were still pending
• Not met the 60-day requirement to grant new loan terms

Masto says that numerous complaints have been submitted to her office over modified mortgages that come with new contracts that are more expensive than what was originally stated. Ending Nevada’s participation in the settlement agreement would let the state file a securities lawsuit against the bank over its allegedly questionably practices.

Countrywide, which was acquire by Bank of America, settled lawsuits with a number of states, including Nevada over what they contend was predatory lending practices. To settle the complaints, the bank promised to designate $8.4 billion as direct loan relief, waive tens of millions of dollars in prepayment penalties and late fees, put aside money to help people in foreclosure, help 400,000 borrowers with financial relief, and suspend foreclosure on borrowers that were delinquent and had the most high risk loans.

Unfortunately, in Nevada, where 262,622 Countrywide loans were originated, foreclosure issues piled up, as did complaints about the bank’s loan service practices. Nevada’s new complaint also accuses Bank of America of:

• Telling credit report agencies that consumers who weren’t in default were in default.
• Deceiving borrowers about the reason their requests for loan modifications were turned down.
• Incorrectly claiming that borrowers that had made payments on trial loan modifications hadn’t paid.
• Falsely claiming that loan owners wouldn’t allow changes to mortgages.
• Misleading borrowers with loan modification offers that came with one set of terms but then returning with a different deal.
• Limiting the amount of time employees could help troubled borrowers with their loan-related issues and punishing those that violated these restrictions.
• Not providing the required loan documentation when it packaged mortgage securities and sold them to investors.
• Failing to endorse a mortgage note, per the typical pool and servicing agreements made between investors and Countrywide, and not delivering it to the trustee in charge of the pool.

Nevada says that Such paperwork failures should have prevented the bank from being able to foreclose on borrowers.

Masto’s request to get out of the Countrywide settlement could impact other negotiations by other state attorneys general related to allegedly improper foreclosure practices against Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo. These banks are being asked to put out approximately $20 billion toward loan modifications. Discussions here have been delayed because there is disagreement over whether a settlement would let state regulators sue the banks over questionable practices in the future.

Related Web Resources:
Nevada Says Bank Broke Mortgage Settlement, NY Times, August 30, 2011

Nevada’s Attorney General pursues BofA, UPI, September 19, 2011

More Blog Posts:

Countrywide Finance. Corp, UBS Securities LLC, and JPMorgan Securities LLC Settle Mortgage-Backed Securities Lawsuit Filed by New Mexico Institutional Investors for $162M, Institutional Investor Securities Blog, March 10, 2011

Bank of America and Countrywide Financial Sued by Allstate over $700M in Bad Mortgaged-Backed Securities, Stockbroker Fraud Blog, December 28, 2010

FDIC Objects to Bank of America’s Proposed $8.5B Settlement Over Mortgage-Backed Securities

Published on: August 30, 2011 | by Shepherd Smith Edwards & Kantas, LLP

In the State Supreme Court of New York, the Federal Deposit Insurance Corp. has fled an objection to Bank of America proposed $8.5 billion mortgage-backed securities settlement. The FDIC, which is the receiver for failed banks and owns the securities that the settlement is supposed to cover, says it doesn’t have sufficient information to assess the settlement.

Per the agreement, Bank of America would pay to resolve claims brought by investors of mortgage bonds from Countrywide Financial Corp., which the investment bank acquired in 2008 for $4 billion. Already, the claims related to the Countrywide MBS has cost Bank of America over $30 billion.

The $8.5 billion securities settlement with Bank of America is over $424 billion in mortgages from Countrywide and was reached with 22 institutional investors, including: