Things continue to worsen for Bank of America (BofA). After hoping to quell the disquiet from former Countrywide Financial Corp. investors that lost money during the housing collapse with an $8.5-billion settlement last month, BofA is facing a new suit from 15 plaintiffs that believe the agreement is unfair.
The plaintiffs, including BlackRock Inc., T. Rowe Price Group Inc. and TIAA-CREF, reportedly believe they can recover more money by separately suing BofA, which purchased Countrywide in 2008. The plaintiffs allege Countrywide and its former officials abandoned prudent lending practices and inflated its earnings, among other complaints, all in an effort to drive up market share.
BofA issued a statement saying that it’s unfortunate the plaintiffs have chosen to opt out of the settlement, and intends to “vigorously defend” itself against the claims.
The plaintiffs are seeking class-action status, unspecified damages and a jury trial, their lawyer told Reuters.
Under the terms of the originally proposed settlement, BofA would turn over $8.5 billion in cash to Bank of New York Mellon Corp., which acted as the trustee for the bondholders and would distribute funds to the investors. BofA would then take a corresponding pre-tax charge against earnings for the second quarter, which is expected to result in about $5 billion in after-tax costs to the bank.
If went as outlined, the settlement would have been the largest such payment by a financial services provider to date.
For more details, read Reuters’ coverage of the situation.