Beleaguered Bank of America Corp. (BofA) just received confirmation that its legal troubles are far from over.
A judge decided yesterday that a federal court must review the bank’s proposed $8.5 billion settlement with investors that lost money on mortgage-backed securities because the deal, which would be the largest such payment by a financial services provider, concerns important national interests.
“The settlement agreement at issue here implicates core federal interests in the integrity of nationally chartered banks and the vitality of the national securities markets,” Manhattan U.S. District Judge William Pauley said yesterday in his decision. “A controversy touching on these paramount federal interests should proceed in federal court.”
Reuters reported that Judge Pauley ordered the parties to attend a hearing on Nov. 3 in his court to discuss management of the case.
The contentious deal concerns Countrywide Financial Corp. investors who claim BofA, which purchased Countrywide in 2008, misrepresented the quality of mortgages it sold to them. In June, Bank of New York Mellon Corp., which was a trustee for the mortgage securities, filed the multibillion-dollar cash settlement in New York state court and planned to get it approved at a Nov. 17 hearing.
Twenty-two major investors approved the settlement, but in September New York Attorney General Eric Schneiderman claimed other investors affected by the settlement were excluded from the decision. American International Group Inc. is one investor that has criticized the agreement and sued BofA.