More Legal Costs Confronts Bank of America
The liability of Bank of America which was brought about by the mortgages which originated from Countrywide Financial remains undetermined and could continue to increase for years to come. This was revealed by industry analysts.
According to Christopher Mutascio, a Stifel Nicolaus analyst, “The legal troubles for Countrywide are not going to end anytime soon. Countrywide was at the center in faulty underwriting compared to its peers.”
Another analyst, Paul Miller from FBR Capital Markets, agrees that the legal settlements due to the acquisition of Countrywide will keep piling on Bank of America. “They underestimated the liabilities associated with Countrywide,” said Paul Miller. “However, I don’t think they will have to make raise capital any time soon because of it,” he added.
A deal was approved by a federal judge in Los Angeles for Bank of America to pay $600 million, including pension funds, to the 33 investors who filed a class action lawsuit against the bank for misleading them about the underwriting procedures of Countrywide.
Nevertheless, some of the institutional investors that are involved in the lawsuit rejected the $600 million court settlement and opted instead to settle on their own terms with the bank.
According to the Los Angeles Times, more than 33 investors have pulled out of the agreement. These include T. Rowe Price Group (TROW_), Maryland State Retirement and Pension System, Nuveen Investments, and BlackRock (BLK_).
As this developed, the Bank of America spokesperson Shirley Norton stated, “It is unfortunate that some investors chose to opt out of what we believe is a fair and equitable agreement to settle these issues.”