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AG reviewing Bank of America deal

New York Times / July 13, 2011

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Eric Schneiderman, the New York attorney general, has asked for information about the $8.5 billion settlement agreed to late last month by Bank of America and representatives of 22 large investment firms holding soured mortgage securities, indicating that he may intervene to challenge the deal.

Letters sent by Schneiderman’s office to the firms that agreed to the settlement point to concerns that the deal may have been struck without full participation by all investors who would be affected by its terms. The letters, obtained by The New York Times, were sent to BlackRock Financial Management, Metropolitan Life Insurance, Pimco, Goldman Sachs Asset Management, and 18 other parties, asking for information “regarding participation by both your firm and clients’’ in the settlement.

A spokesman for Schneiderman declined to comment. But this request for information is part of a broad investigation that he has begun into all aspects of the mortgage bundling process.

The proposed settlement covers 530 mortgage pools issued by Countrywide Financial, the lender purchased by the bank in a distress sale in 2008. But the investment firms that agreed to the deal held interests in only about one-quarter of those pools, leading some investors to question its fairness. Furthermore, the proposed settlement does not allow investors who do not like its terms to opt out and bring their own suits against Bank of America.