BofA

Motion to Dismiss Granted in Part in Repurchase Suit Against BofA, Countrywide

On February 13, Justice Eileen Bransten of the Supreme Court of the State of New York dismissed in part a second amended complaint filed by U.S. Bank as trustee for HarborView Mortgage Loan Trust, Series 2005-10.  As in its prior decision on a similar claim , the court held that U.S. Bank could not, under the relevant contracts, seek repurchase of all loans in the trust on the basis of alleged “pervasive breaches” of representations and warranties related to mortgage loans.  Plaintiff’s breach of contract claims related to 495 loans will proceed.  Order.

Court Denies BofA’s Motion to Reconsider Use of FHFA Documents Produced in Other RMBS Litigation

On February 14, Judge Denise Cote of the United States District Court for the Southern District of New York denied Bank of America’s request to reconsider the court’s earlier order disallowing use of documents produced by plaintiff Federal Housing Finance Agency in a case against Countrywide pending in California.  The court found that the parties had obtained sufficient documents to litigate the claims and defenses at issue and that allowing a party to use documents from other litigation in motion practice or at trial would undermine the discovery procedures established by the Court.  Order.

New York, Delaware AGs Again Intervene in BofA-Countrywide MBS Settlement Proceeding

On Wednesday, June 6, 2012, Judge Barbara R. Kapnick granted the motions of the Attorneys General of the states of New York and Delaware to intervene in the proceeding to approve the $8.5 billion settlement between Bank of America and investors in certain Countrywide MBS. Both Attorneys General previously had been allowed to intervene in related federal court proceedings. The case was subsequently remanded to state court, where the New York and Delaware AGs again sought to intervene. In granting the motions over the objection of the trustee for the MBS trusts and certain institutional investors, Judge Kapnick found that the Attorneys General had “identified legitimate quasi-sovereign interests at play in this Proceeding,” and that the intervention would not result in undue delay. Order.

Bank of America’s Motion to Consolidate Actions by Bond Insurers Denied

On October 31, 2011, Justice Bransten of the Supreme Court for the State of New York denied Bank of America’s (“BofA”) motion to split the successor liability claims from four separate lawsuits pending against the bank and consolidate those claims into a single case. Four monoline insurers that insured Countrywide mortgage-backed securities – MBIA Inc., Syncora Guarantee Inc., Ambac Assurance Corp., and Financial Guaranty Insurance Co. – have sued BofA and Countrywide for fraud and breach of contract. BofA argued that the nearly identical successor liability claims in the four suits should be severed from the individual cases, consolidated, and stayed until after primary liability is decided. Justice Bransten agreed the claims were similar but found severance and consolidation would prejudice MBIA, the first to file suit, by unduly delaying its claims while the other insurers conduct discovery. Decision.

Institutional Investors Question AIG’s Motion to Intervene in Proposed BofA Settlement

On August 15, 2011, the institutional investors that negotiated the proposed $8.5 billion settlement with Bank of America regarding representations and warranties claims against Countrywide Financial Corp. filed a response to AIG’s motion to intervene and oppose the settlement. The institutional investors did not object to AIG’s intervention, but urged the court to carefully scrutinize AIG’s objection, pointing to AIG’s failure to disclose a simultaneously filed individual securities lawsuit against BofA as evidence that AIG is improperly attempting to advance its own interests ahead of those of other certificate holders. Investors’ Response.

Delaware AG Joins New York AG In Challenging $8.5 Billion Bank Of America Settlement

Delaware Attorney General Joseph “Beau” Biden III moved on August 9 for leave to intervene in the court proceeding brought to approve Bank of America’s $8.5 billion settlement with holders of Countrywide Financial Corp.’s mortgage-backed securities. The Delaware AG challenges the fairness of the settlement, expressing concerns about the impact of the proposed settlement on the rights of the Delaware state pension funds. Motion.

AIG Sues Bank Of America Over Alleged Fraud In RMBS

On August 8, 2011, American International Group sued Bank of America Corp., Countrywide Financial Corp., and Merrill Lynch & Co. in New York state court, claiming that between 2005 and 2007 the defendants fraudulently induced AIG to invest in 350 residential mortgage-backed securities at a cost of $28 billion. AIG claims that the defendants did not engage in prudent underwriting practices, and ignored mischaracterizations made by borrowers about income and employment. The AIG complaint cited a forensic investigation done of the securitizations before the suit was filed, alleging that 40% of loans sampled were improperly evaluated on the risk metrics the defendants included in their offering materials. AIG alleges violations of Sections 11, 12(a)(2), and 15 of the ’33 Act, and state law claims of fraudulent inducement, aiding and abetting fraudulent inducement, negligent misrepresentation, and vicarious and successor liability. AIG seeks $10 billion in compensatory damages, among other remedies. Complaint.

Several Institutional Investors Sue Countrywide In California Federal Court Over Misstatements Regarding Loan Quality

On July 28, 2011, several institutional investors filed a complaint against Countrywide Financial, Bank of America, several former Countrywide officers, and KPMG in the Federal District Court for the Central District of California. Plaintiffs allege that Defendants made false and misleading statements regarding the quality of loans originated by Countrywide, which allegedly inflated the value of Plaintiffs’ Countrywide securities, in violation of Sections 10(b), 20(a), and 20A of the Exchange Act and Sections 11, 12(a)(2), and 15 of the Securities Act. Plaintiffs opted out of the recently-settled class action against Countrywide to pursue their own claims. Complaint.

S.D.N.Y. Upholds BofA’s Decision Not to Pursue Claims Against Merrill Lynch D&Os

On March 29, 2011, Judge Jed S. Rakoff of the Southern District of New York dismissed derivative suits filed by Bank of America Corp. shareholders who sought to pursue claims on behalf of BofA against the officers and directors of its subsidiary, Merrill Lynch & Co., for their part in Merrill’s CDO and RMBS losses. In his decision, Judge Rakoff noted that the allegations described the “kind of risky behavior by high-ranking financiers that helped create the economic crisis” but found that the plaintiffs’ claims were too conclusory to establish that BofA’s Board’s refusal to pursue the claims was made in bad faith. The Board’s letter of refusal stated that it had decided not to sue because the chances of recovery were slim, and doing so would undercut Merrill’s defenses in governmental inquiries and other subprime litigation. Merrill Decision.

RMBS Complaint Filed Against Countrywide in Connecticut

On January 27, 2011, Putnam Bank filed a putative class action in the District of Connecticut accusing Countrywide Financial Corp. (now an affiliate of Bank of America) and several executives of selling RMBS backed by materially false statements and omissions. The putative class covers purchasers and acquirers of eight different series of RMBS certificates issued between 2006 and 2007. Plaintiffs seek compensatory and/or recessionary damages under both Federal and Connecticut Securities laws. Complaint.