FDIC intervenes with Bank of America's mortgage settlement

The Federal Deposit Insurance Corporation recently filed an objection to the proposed settlement between Bank of America and investors. According to the filing yesterday in a Manhattan federal court, the FDIC owns securities covered in the settlement and said it lacks enough information to properly evaluate the deal.

Bloomberg reported that Bank of America proposed to pay $8.5 billion in a deal with investors in Countrywide Financial Corporation, who say the mortgage bonds they purchased were toxic. The FDIC joins investors and states that are challenging the agreement. Bank of New York Mellon Corporation is pushing for the settlement to be accepted by the court, while a group of investors, New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden have asked the court to reject the deal.

In an interview with Bloomberg Television, Paul Miller, an analyst at FBR Capital Markets, said if the initial proposed settlement does not get court approval, Bank of America will most likely have to pay more in the second round of negotiations.

"If the judge accepts it, then that's going to be a big positive, because that starts to ring-fence those private-label losses, and we can start to move forward and say 'This is what we think the losses are going to be,'" Miller told the news source.

Lawrence Gayson, Bank of America spokesman, said the bank is confident that the trustee acted reasonably and believes the settlement should be approved, MSNBC reported. A New York state judge is set to decide on the settlement on November 17.  

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