The announcement of the $8.5 billion settlement by the Bank of America is not good news for the home owners particularly those who are at a risk of facing a foreclosure for the deal includes a clause that the Bank will deploy extra ‘subservicers’ to hasten the foreclosure process.
Settlement to hasten up the foreclosure process
The bank spokesman Jerry Dubrowski said that living with the fear of a foreclosure looming large is not particularly pleasing for individuals.
It is also in the interest of the economy to hasten the foreclosure process, opined Dubrowski.
The bank therefore intends to step up the process of foreclosure especially in cases where it was put on hold till now.
The deal is not the end of the mortgage related problems of the Bank as it has been supported by one fourth of the investors. A large number of investors who hold securities worth another $300 billion have not endorsed the deal yet.
The bank also acknowledges that there is no guarantee of these investors agreeing to the deal.
A statement released by the bank after the deal mentioned that the settlement could face challenges. Furthermore, the deal requires the approval of the court.
The Bank of America agreed to pay $8 billion to clear up the claims of the investors who brought the $100 billion worth securities related with faulty mortgage from its division Countrywide. These investors include the Federal Researve Bank of New York, Pimco, BlackRock and Metropolitan life.
Besides claiming that the securities sold to them by the bank through Countrywide were based on faulty loans, these investors also claimed that the bank profited from the service fees charged for servicing these bad loans when it should have accelerated the foreclosure process.
The investors having even the best ranked bonds are facing losses as the home prices continue to fall and the cases of mortgage default remains on the higher side.
An inquiry is also being conducted by the attorney generals of almost all the 50 states who are probing the allegations of improper conduct by some of the main mortgage service providers. The banks, including the BoA is facing pressure from states to pay up to 430 billion as fine and penalty.
In case a combined settlement is not arrived at, the bank is set to face numerous litigations initiated by states that opt for following their claims individually.