Bank of America may see the return of a headache it thought was over. The U.S. government has filed an objection that could put the kibosh on a $500 million settlement the lender agreed to earlier this year over defective mortgages, according to a Wall Street Journal report.
The settlement, announced in April, was over allegations that the lending giant sold billions in securities backed by shoddy loans issued by its Countrywide Financial unit, which Bank of America acquired in 2008. Several pension funds sued Countrywide in 2007. Other pension funds were added to the case later, the Journal reported.
Bank of America said the settlement would resolve 80% of the claims against Countrywide and 70% of the claims against Bank of America-created loans with similar issues, according to the Journal. But on Monday, the FDIC filed an objection, alleging that the settlement was only negotiated by a subset of the plaintiffs in the case. That subset, the FDIC claimed, “would receive substantial payments at the expense of the rest of the class.”
Steven J. Toll, lead counsel for the plaintiffs, told the Journal that he didn’t believe the objection had merit.
A judge has already given the settlement a preliminary okay, the Journal reported. A hearing for final approval is scheduled for late October.