$8.5 Billion Countrywide RMBS Settlement with Bank of America
With lead partner Kathy Patrick, prosecuting Countrywide residential mortgage-backed security (RMBS) representation and warrant claims on behalf of our institutional investor clients.
In 2010, Gibbs & Bruns was engaged by 22 of the largest institutional investors, including financial giants PIMCO, BlackRock, MetLife and others, as well as the Federal Reserve Bank of New York and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), to assert claims against Countrywide and its corporate parent Bank of America relating to representation and warranty violations (“put-backs”) and mortgage servicing claims at issue in 530 Countrywide residential mortgage securitization trusts. Our clients engaged us to enforce their rights, through the governing agreements, to compel the repurchase of ineligible mortgages that do not conform to the representations and warranties concerning the collateral in the RMBS trusts.
On June 29, 2011 we announced that the firm, on behalf of its clients, had reached an $8.5 billion settlement with Bank of America resolving all mortgage put-back and servicing claims relating to the 530 trusts. The settlement provides not only the $8.5 billion cash payment to the trusts, but also requires Bank of America to make mortgage servicing improvements that will streamline the servicing of the 770,000 mortgages at issue in the trusts, improvements that various market sources suggest provide as much as several billion dollars of additional value to the trusts. The settlement also requires Bank of America to cure certain mortgage document issues, and provides the 530 trusts (and consequently the investors in those trusts, including our clients), with a full indemnity for any value lost in connection with mortgages in the trusts as a result of certain mortgage documentation deficiencies.
The settlement received worldwide top billing in the financial press. On June 29, 2011, The New York Times reported it as “likely to be the single biggest settlement tied to the subprime mortgage boom and the subsequent financial crisis of 2008.” The Wall Street Journal labeled the deal a “mammoth settlement” by a group of “high-profile investors” and as the “turning point in Wall Street’s epic struggle with the fallout from the financial crisis.” An analyst for Credit Agricole, quoted in The New York Times, stated that the settlement is “the most significant step since the financial crisis that helps” in “improving the economy.”
Gibbs & Bruns is currently prosecuting the court approval of the settlement.