"New York Attorney General Eric Schneiderman has filed a motion to intervene in the $8.5 billion settlement between Bank of America and mortgage backed securities investors, calling the proposed settlement “unfair and inadequate,” and seeking to represent those investors who would be unrepresented at court but bound by the judgment. In addition, Schneiderman alleges “fraudulent and deceptive conduct” on the part of Bank of New York Mellon, the trustee in the case.
In the filing, Schneiderman writes that “BNYM (Bank of New York Mellon) stands to benefit from the settlement agreement and that the relief sought here appears designed to largely insulate BNYM from fiduciary duty claims arising from the settlement,” so there is no reason to believe that the trustee will act in the interests of the investors rather than in its own self-interest. Schneiderman also points out that the settlement is meager compared to the losses felt by investors on these MBS. In addition, he writes, “the purported servicing improvements are too vague and ill-defined to provide any concrete value to investors.”
........."This is a major allegation. Schneiderman is saying that the game-playing with securitizations, which has been well-documented, represent violations of securities law on the part of the trustee and the originator of the loans. They knowingly sold junk to investors and violated their own agreements. And now they’re trying to whitewash it through a settlement where the bank and the trustee are colluding with one another. As Schneiderman says, “the Trustee stands to receive direct financial benefits under the Proposed Settlement.”
And here’s the real bombshell: Schneiderman alleges that Bank of New York Mellon was aware that Countrywide failed to transfer loans properly to the trust. This means they sold what amounted to non-mortgage backed securities to investors, who should then be granted the full value of these bonds back. The pooling and servicing agreements governing the loan transfers are very precise, and were violated in this case, according to the AG. As he writes:
These provisions are central to any mortgage securitization, but they are now vitally important to trust investors in light of the housing market collapse. Any action to foreclose requires proof of ownership of the mortgage. This must be demonstrated by actual possession of the note and mortgage, together with proof of any chain of assignments leading to the alleged ownership. Moreover, complete mortgage files give borrowers assurance that their properties are properly foreclosed upon. The failure to properly transfer possession of complete mortgage files has hindered numerous foreclosure proceedings and resulted in fraudulent activities including, for example, “robo-signing.” These fraudulent activities have burdened borrowers as well as the courts with flawed foreclosure proceedings"..............READ MORE
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