Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Bank of America Says Countrywide Bankruptcy Remains an Option
Author: Joel R. Glucksman
Date: June 25, 2013
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Bank of America is playing hardball with its Countrywide Financial unit, and recently raised the possibility of putting Countrywide into bankruptcy only two years after reaching a landmark $8.5 billion settlement with mortgage investors.
Countrywide, which struggled to stay afloat following a swarm of mortgage-related litigation after the housing market collapse, was purchased by Bank of America in 2008. However, the mortgage company’s legal issues are far from over, and institutional investors are now challenging the $8.5 billion settlement, claiming that the amount is inadequate.
Currently, AIG and other investors are asking the court to reject the settlement, which they called a “pennies-on-the-dollar bargain” for the bank, Bloomberg reports. This is largely because many investors report their total losses to be upwards of $100 billion.
At a court hearing in New York, Bank of America’s chief risk officer Terrence Laughlin said that recent talks with mortgage investors were “very tense” and combative, with both sides taking “very strong positions,” according to Bloomberg.
“I thought they were being extremely aggressive and one-sided in what they thought future losses would be coming out of these trusts,” Laughlin told the news source. “The investors were putting forth a very negative scenario. They were trying to put forth a high loss number [to reach a higher settlement.]”
If resolution talks fail and the bank does not win court approval for the settlement, seeking bankruptcy law protection for Countrywide may be a viable option.
“One of the options that was available to us and continues to be available to us was to put Countrywide into bankruptcy,” Laughlin said at the hearing.
While a handful of investors continue to lobby for a higher settlement amount, there are several investors that are in support of the existing terms and conditions, including Pacific Investment Management Co., Goldman Sachs Asset Management, and MetLife Inc.
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