Bank of America Shrugs Off Continuing Legal Issues
Bank of America rode the market wave up today, ending the day up nearly 3% despite news out of New York that the bank must return to court to fight a lawsuit by a unit of US Bancorp . For Bank of America, it's just the latest lawsuit stemming from its acquisition of Countrywide Mortgage back in 2008.
Countrywide problems persist
U.S. Bank is the trustee for HarborView Mortgage Loan Trust, and it's suing based on HarborView's agreement that it signed with Countrywide when it purchased some mortgages in 2005. Countrywide said it would repurchase all the loans within 90 days should there be a material breach in the mortgage loan pool. It wasn't long after the initial purchase that many of the loans did just that, with 66% of a small sample breaching one or more mortgage representations.
Fast-forward to 2011, with US Bancorp suing Countrywide -- and Bank of America after the mortgage lender was acquired in 2008 -- claiming that Countrywide had "failed to repurchase any loan" and "offered no basis for its refusal" to do so. The suit originally asked for Bank of America to repurchase more than 4,000 loans from HarborView, but Justice Eileen Bransten of the New York Supreme Court in Manhattan rejected the full claim, though US Bancorp does have the opportunity to resubmit an argument for the full claim on behalf of its trustor. A separate claim of 495 loans, however, was allowed to move forward, forcing Bank of America to return to court or settle.
What to expect
Bank of America is no stranger to the courtroom, having faced multiple lawsuits over the past few years directly as a result of its Countrywide acquisition. Recently, it seems more willing to settle cases to move on from these troubles, such as how it reached a settlement with mortgage-bond insurer MBIA. I think Bank of America will reach out to US Bancorp and attempt to reach a settlement in this relatively small case, preventing further issues down the road.
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