U.S. Bancorp sues Bank of America for putbacks
The Bank of America litigation pile-on continued this week, as U.S. Bancorp, in its role as trusted for the HarborView Mortgage Loan trust, filed another suit over warranty and representation issues related to a $1.75 billion pool of mortgage-backed bonds, according to media reports.
We presume that the suit, filed in state court in New York, was preceded by a healthy effort at settlement, which obviously fell apart. It's unclear exactly what the bondholders or their trustee were thinking, but it's quite possible that they took a look at another trustee-driven settlement, the controversial $8.5 billion settlement inked by Bank of New York Mellon on behalf of some big name bond holders. That has become controversial as some bondholders have gone to court against Bank of America and the trustee for inking a deal that in their mind falls well short of fair.
The New York AG has also opened an inquiry into this. And the FDIC has intervened. U.S. Bancorp obviously doesn't want to end up similarly accused, and the actual bond holders may be sensing the time is ripe to go for broke. The suit is asking for all bonds to be putback due to breach of warranties and representation agreements. That's stipulated in the contract, but Bank of America has yet to buy back a single issue.
In any case, this represents yet another sign that the legal cost situation at Bank of America remains uncertain. We may see another spike in reserves if more litigants come out of the woodwork.
- here's an article from the Washington Post