BofA shares slide on fresh lawsuit fears
BANK of America Merrill Lynch saw its shares fall again yesterday over a backlash against its plan to settle $8.5bn (£5.2bn) of mortgage disputes.
The Federal Deposit Insurance Corporation, which manages failed US banks, and dozens of other investors objected to BofA’s plan to resolve huge claims from investors sold subprime bonds by mortgage lender Countrywide Financial, which BofA took over in 2008.
FDIC said it did not have enough information to evaluate whether the settlement was reasonable, sticking a spanner in BofA’s plans to settle a sub-prime mortgage dispute brought by 22 major investors including the New York Federal Reserve and BlackRock.
“We believe that the trustee acted reasonably in entering into the settlement, and that there are compelling reasons why the agreement should receive judicial approval,” BofA spokesman Lawrence Grayson said.
The news revived fears over BofA’s ability to pay bigger sub-prime claims and though it confirmed yesterday it had sold half its shares in China Construction Bank for $11.6bn, its shares closed down three per cent.
BofA also came under fire over its $5bn funding deal, signed five days ago with billionaire investor Warren Buffett, as critics warned that it was a good deal for Buffett but few others.
And BofA was hit by a $1.75bn lawsuit from US bank Bancorp for failed mortgage-backed securities it was sold before the financial crisis.