Latest on Bank of America MBS Settlement

Remember that proposed $8.5 billion Bank of America settlement with investors back in June? “Not so fast,” said the FDIC. The settlement still requires a judge’s approval, and the FDIC filed an objection in federal court in Manhattan as an investor rather than as a regulator of the Bank of America. It said it owns securities that would be covered by the settlement because it took over banks that failed during the financial crisis. “The reason for the FDIC’s objection is that it does not have enough information to evaluate the Settlement,” it said in the notice. According to the Financial Times, “Several investors have requested to intervene in the settlement. Earlier this month, AIG sued Bank of America to recover more than $10 billion it lost on mortgage investments, and also objected to the proposed $8.5 billion settlement, and another potential settlement, with state law enforcers, still looms.”

On the other side of the balance sheet, Bank of America has struck a deal to sell about half of its stake in China Construction Bank to a group of investors for $8.3 billion and thus making a profit of $3.3 billion. In the mortgage world, rumors abound concerning Bank of America exiting correspondent lending, given the defection of top individuals in recent months, its exit from wholesale late last year, the easing of mortgage pricing in recent months, and the focus on taking care of problems with older loans. BofA’s shares have tumbled more than 40% this year, much of it due to issues in the mortgage business, and headlines were made again late last week with Warren Buffett’s Berkshire Hathaway buying $5 billion of preferred stock.