On June 29, 2011, Bank of America and 22 institutional investors jointly announced that they had reached a settlement of repurchase and mortgage servicing claims related to 530 RMBS trusts of primarily first-lien loans issued by Countrywide. The trusts had an original principal balance of $424 billion and current unpaid principal balance of approximately $221 billion, and represent nearly all Countrywide first-lien private label RMBS exposure held by Bank of America.
The terms of the settlement provide that (1) Bank of America pay $8.5 billion to the Trustee of the trusts (BNY Mellon) to be allocated to the trusts on a collateral loss formula; (2) Bank of America will implement several loan servicing improvements designed to improve both borrower and investor outcomes; (3) the Trustee will seek court approval of the settlement; and (4) the institutional investors will intervene in the action and use their best efforts to ensure court approval. As part of the settlement, Bank of America also has agreed to cover future losses to investors when foreclosure on defaulting borrowers is prevented because of faulty or missing documentation. The settlement is expressly limited to repurchase and servicing claims, and any direct claims held by investors based on allegedly misleading disclosures or omissions in connection with the sale of the RMBS issued by the trusts are not released.
The settlement is subject to court approval, which could require changes to the terms of the agreement. Bank of America also retains the right to withdraw from the settlement if trusts holding a certain, confidential percentage of the aggregate principle balance are not part of the settlement. Bank of America Press Release. Investor Press Release. Settlement Agreement. Bank of America Investor Presentation.