By David McLaughlin
March 1, 2013
Bank of America Corp.’s $8.5 billion mortgage-bond settlement was reached through a “seriously flawed” process, said an expert for American International Group Inc. (AIG), which has challenged the deal.
The New York state judge considering the settlement should conduct a ”full and detailed inquiry” before approving it, Boston University law professor Tamar Frankel said in a court filing yesterday in Manhattan. Bank of New York Mellon Corp., the trustee for investors in the securities, is seeking approval for the agreement.
“The process in which the settlement was negotiated and reached is seriously flawed, as the trustee acted in conflict of interest and failed to exercise due care,” Frankel said.
The settlement, which would resolve claims over Countrywide Financial mortgage bonds, was reached in 2011 and is scheduled to be considered for approval at a hearing beginning May 30 in New York State Supreme Court.
The settlement has the support of a group of institutional investors, including BlackRock Inc. (BLK) and Pacific Investment Management Co. It has drawn criticism from AIG. The insurance company has said in court papers that Bank of America is “drastically underpaying” and that the settlement was the result of a “highly conflicted process…”
Read the full article at Bloomberg.com.