BofA investors plot challenge over pay out

A GROUP of bondholders in Bank of America plan to challenge the lender’s $8.5bn (£5.2bn) settlement with holders in soured mortgage-backed securities.

Eleven companies, known together as Walnut Place, filed papers in the New York Supreme Court in a bid to overturn the payment.

They say they have “serious concerns about the secret, non-adversarial, and conflicted way in which the proposed settlement was negotiated and about the fairness of the terms”.

Bank of America had announced the settlement with 22 institutional investors including BlackRock, MetLife, Allianz’s Pacific Investment Management and the Federal Reserve Bank of New York.

That accord was part of $20bn of mortgage-related charges that the bank said it would take, hoping to resolve much of the liability from its $2.5bn purchase in 2008 of US mortgage lender Countrywide Financial.

But Walnut Place called the settlement plan “inadequate”. It said it plans on 13 July to ask Justice Barbara Kapnick, whose approval is required for the settlement, to excuse it from the accord, or else to compel greater disclosures about the pact.