Bank of America faces long litigation before reaching mortgage deal

With investors and federal regulators scrutinizing a proposed deal from Bank of America in an effort to resolve a lawsuit over mortgage liabilities, U.S. agencies and other companies are gathering more information on the case in an effort to get more money in the settlement. The offer for $8.5 billion from Bank of America was made to appease institutional investors demanding the bank buy back home loans issued by the Countrywide Financial Corporation that went sour at the onset of the housing crisis.

Bloomberg reported the settlement would cover the 530 mortgage trusts and is backed by Bank of New York Mellon Corporation, the trustee for the mortgage-bond deals. Insurance companies, pension funds and federal home loan banks are some of the investors opposed to the deal, demanding further investigation into the sour mortgage bonds.

The possibility of moving the case from the state court to the federal court would turn the dispute into a class-action lawsuit and enable investors to refuse the proposed settlement. Zachary Rosenbaum, an attorney at Lowenstein Sandler PC, told the news source that Bank of America could be forced to pay almost double the proposed settlement if investors provide evidence that $8.5 billion is not enough compensation.

Law professor at the University of California at Irvine, Katie Porter, told the news source she predicts the lawsuits could drag on for two years due to investors probing the case for more information, leading the bank to pay more money. Porter said a big determinant in the outcome of the suits will be a full scope of the harm caused to investors and homeowners through the sour mortgages. 

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