Homeowners Seek to Intervene in Settlement Approval Process

Bank of New York ostensibly represented the best interests of the investors (for whom it was supposed to be acting as trustee) in settling its claims with BoA.  Not so, say many.  As Abigail Field writes here:

In fact, viewing the $8.5 billion proposed settlement through homeowners’ eyes again highlights how deeply conflicted BNY was during the negotiations, how beholden to BofA.  As trustee BNY is supposed to represent the investors, and yet the servicing part of the deal would result in foreclosures when modifications would make investors more money. And the economic harm to investors of every foreclosure that should have been a modification is compounded by the fact that BofA makes tremendous fee income from foreclosures. Every BofA fee is money kept out of investors’ pockets.

If BNY was vigorously defending investors, why wouldn’t it have insisted BofA modify every loan when modification made the investors more money than foreclosure? If BofA wouldn’t agree to that, why wouldn’t BNY reply: See you in court!? That is, the issue isn’t trivial for investors. The number of modifications that would make investors more money than foreclosures is high; not requiring those loans to be modified costs the investors a lot. In fact, HAMP requires such loans to be modified. If the settlement allows BofA to leave HAMP as homeowners fear, investors will lose even more money on mortgage backed securities than they already have

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