|© AFP/File Saul Loeb|
NEW YORK (AFP) – A US government agency has objected to Bank of America’s $8.5 billion settlement for losses on mortgage-backed securities, imperiling the bank’s efforts to move beyond the subprime mess.
The Federal Deposit Insurance Corporation, which insures bank deposits and plays a major role in regulating the US banking sector, filed its objection late Monday in a New York court, according to a court filing.
“The reason for the FDIC’s objection is that it does not have enough information to evaluate the settlement,” it said in the filing.
The banking giant has been struggling to shepherd the settlement through the courts, in a bid to resolve questions about its liability for failed deals involving subprime mortgages that contributed to the 2008 financial crisis.
Since Bank of America announced the settlement in June, private investors who were left out of the settlement talks as well as New York’s state attorney general have filed objections to it.
The settlement, which Bank of America reached with 22 large investment groups, is subject to court approval.
Bank of America was dragged into a costly legal mess because of its 2008 acquisition of Countrywide Financial, which was a leading issuer of subprime mortgages in the run-up to the financial crisis.
Many of Countrywide’s mortgages were bundled into complex mortgage-backed securities that were touted as top-quality investments and sold to investors ignorant of the underlying risks.
When the US housing market took a downturn, the market for such securities collapsed, triggering the crisis.
Since then, Bank of America has faced a slew of lawsuits over the actions of Countrywide, whose mortgages were often poorly documented and issued to borrowers who defaulted soon after the housing price bubble collapsed.
The 22 groups which signed on to Bank of America’s settlement include giant financial institutions such as Goldman Sachs, BlackRock, PIMCO, Metropolitan Life and ING Bank.
© AFP — Published at Activist Post with license