Just as Bank of America Corp (NYSE:BAC) thought it could close its books on an ugly chapter of its existence with regards to 530 residential mortgage-backed securities trusts issued by Countrywide before the U.S. housing crisis that investors claim were highly misrepresented, a new judge postponed a final judgment in the case.
New judge for Bank of America case
Last week, Justice Barbara Kapnick approved the settlement but was promoted to a state appeals court effective February 3, and most of her cases were handed over to Justice Saliann Scarpulla.
Scarpulla immediately ruled to delay the decision from taking effect until at least February 19th, opening up the door for more legal wrangling.
AIG is leading the group of investors who opposed the settlement. American International Group Inc (NYSE:AIG) maintains that there is no evidence that the settlement properly compensates them and others. Lawrence Grayson, a spokesman for Bank of America Corp (NYSE:BAC), declined to comment on the delay.
On the other side of the suit, those that support the settlement, are a group of 22 investors that include BlackRock, Inc. (NYSE:BLK), Metlife Inc (NYSE:MET), and Allianz SE (FRA:ALV) (ETR:ALV)’s Pacific Investment Management Co.
In her ruling on Friday, Kapnick wrote that The Bank of New York Mellon Corporation (NYSE:BK), the trustee representing investors, had acted mostly in good faith in entering into the settlement. She did, however, struggle with one part of the settlement where she believed that Mellon failed to properly investigate whether Bank of America Corp (NYSE:BAC) was obligated to repurchase a number of the modified loans.
American International Group Inc (NYSE:AIG) believes that Scarpulla should withhold a final judgement until a further assessment of how losses should be calculated is finished and they also hope that she looks into the distribution of the settlement money.
Kenneth Warner, a lawyer representing the 22 investors who support the settlement, said in a letter to the judge that a delay would be “prejudicial to the thousands of certificate holders who are waiting for the settlement proceeds to be distributed.”