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New York AG: Settling Toxic Mortgages? Not So Fast, Bank Of America
By
Christopher Robbins
Published Jul 13, 2011
Modified Jul 13, 2011
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By
Christopher Robbins
Published Jul 13, 2011
Modified Jul 13, 2011
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Bank of America really just wants to move past the whole toxic mortgage misunderstanding, and is hoping that by shelling out $20 billion to clean up the mess, their investors and the public will let bygones be bygones. $8.5 billion of that money is for a settlement specifically tied to large investment firms, including BlackRock, MetLife, and Goldman Sachs, who invested in BOA's worthless mortgages (thanks, Countrywide!) and the terms are extremely favorable to the bank: they're paying 5 cents on the dollar and the investors waive their right to sue. Every thing was going according to plan until that meddling New York Attorney General had to get involved.
The Times obtained letters sent by Eric Schneiderman to the 22 firms that are part of the settlement noting that other investors may have been left out, and request information "regarding participation by both your firm and clients" as part of a "broad investigation that he has begun into all aspects of the mortgage bundling process." It's not just smaller investors that have been left out of the settlement's purview: 275,000 borrowers will be affected, with some having their foreclosures sped up depending on how much they currently owe."
BOA claims that the deal will give some homeowners more flexibility with their payments thanks to their mortgages being handled by smaller, more efficient subservicers. But a former Treasury employee and law professor says, "The mortgage services have repeatedly promised to do things and then not done them. An attorney in Florida, the country's most foreclosure-ridden state, says, "It's like giving aspirin to someone with cancer."
One investor, Walnut Place LLC, has protested the settlement and is suing BOA because they claim the bank had secret negotiations with the settlement's negotiator, Bank of New York Mellon, and BOA is covering all their liabilities and costs related to the settlement. If the agreement is approved in November, the lawsuit will disappear. If Schneiderman can succeed in throwing light on the sausage making of cutting up people's debt into tiny pieces for profit, perhaps we'll come to learn that $8.5 billion is just a start.
Tagged
Bank of America
boa
goldman sachs
housing bubble
subprime mortgages
tough times
toxic debt
toxic mortgages
Christopher Robbins
Christopher Robbins is a New York City reporter covering transportation, affordable housing, local politics, and criminal justice. His work has also appeared in New York Magazine, The Village Voice and The New York Times. Chris is a graduate of Patrick Henry High School in Roanoke, Virginia, and enjoys biking to Fort Tilden in the summertime.
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Gothamist is funded by sponsors and member donations
Gothamist is funded by sponsors and member donations
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