Investor Group Files to Split from BofA Settlement Agreement

A group of mortgage-bond investors has filed a petition with the New York Supreme Court requesting to be cut loose from the ""$8.5 billion settlement proposed"":http://dsnews.comarticles/bofa-reaches-settlement-with-investors-over-legacy-countrywide-deals-2011-06-29 last week by Bank of America.

[IMAGE]

The settlement would resolve nearly all of the North Carolina lender's repurchase exposure stemming from legacy first-lien residential mortgage-backed securities (RMBS) issued by Countrywide before it was acquired by BofA in 2008.

Eleven of the companies to be compensated by the arrangement, though, say BofA's proposal is ""inadequate."" The dissenting group, going by the name of Walnut Place, will not identify their corporate brands to the media.

[COLUMN_BREAK]

""Walnut Place has serious concerns about the secret, non-adversarial, and conflicted way in which the proposed settlement was negotiated and about the fairness of the terms of the proposed settlement,"" according to ""court documents"":http://www.cwrmbssettlement.com/docs/Affirmation%20of%20O.%20Cyrulnik%20in%20Support%20of%20Petition%20to%20Intervene%20%28Walnut%20Place%29.pdf.

Bank of America's settlement proposal was struck with Bank of New York Mellon, serving as trustee of the 530 affected securitization trusts. Collectively these deals had an original principal balance of approximately $424 billion and total current unpaid principal balance of approximately $221 billion.

According to a statement from BofA, 22 investors in the RMBS trusts -- including the Federal Reserve Bank of New York, BlackRock, and Pimco -- had agreed to support the bank's proposal.

Walnut Place says its entities own certificates that were issued by three of the 530 trusts.

As part of its proposal, Bank of America also agreed to implement certain servicing changes, including transferring high-risk loans owned by the trusts to subservicers and paying additional fees to the investors if benchmarked default-servicing timelines are not met.

On July 13, Walnut Place plans to ask Justice Barbara R. Kapnick, whose approval is required for the settlement, to excuse it from the pact or else force BofA to provide greater disclosures about the agreement and negotiations, according to the _New York Times_.