In a major setback for Bank of America, a federal judge has moved the venue for their $8.5 billion settlement with investors on mortgage-backed securities issues to federal court. In so doing, the judge criticized the arrangement on a variety of fronts.
BofA hoped to do away with all of their investor liability on Countrywide MBS in one fell swoop with the settlement, negotiated with only a small sliver of institutional investors through the trustee, Bank of New York Mellon. Other investors, as well as the Attorneys General of New York and Delaware, criticized the deal and took BofA and BNYM to court over it. Keep in mind that the $8.5 billion settlement represented around 2-3 cents on the dollar for the total pool of mortgage securities affected.