Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Bank of America's Billion-Dollar Judgement Day Is Only Days Away

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

More than two years after a settlement was struck between Bank of America (NYSE: BAC  ) and 22 institutional investors over a passel of mortgage securities gone bad, a job promotion for the judge presiding over final approval of the deal means a decision will be announced very soon, probably within two weeks.

The 530 mortgage trusts at the core of the dispute were sold by Countrywide before the financial crisis and started to go south shortly thereafter. The lawsuit, which included big names such as BlackRock and AIG (NYSE: AIG  ) , was settled in mid-2011 for $8.5 billion.

But some investors balked, claiming that trustee Bank of New York Mellon (NYSE: BNY  ) had a cozy relationship with B of A and therefore didn't act in the investors' best interests -- and alleging that investors were only getting pennies on the dollarwith the $8.5 billion settlement. Last June, a hearing began in New York to determine if BNY Mellon acted in good faith when it agreed to the settlement.

"Reasonable" actions
Judge Barbara Kapnick presided over the Article 77 hearing in order to determine if BNY Mellon acted "reasonably" as the investors' trustee when it sanctioned the settlement. The hearings, which often described acrimonious negotiationsduring the actual settlement talks, concluded last November. At that time, AIG emerged as the most vocal of the settlement's detractors; most had, by then, retracted their opposition to the settlement.

The weeks have gone by, and all parties have been patiently awaiting Judge Kapnick's decision. Now, it appears the wait is over. The judge has been handed a promotion, and her new job starts in early February. This has prompted an announcement by Kapnick's office that a decision on the Bank of America settlement case will be handed down before she begins her new position.

Either way, this is huge for B of A
If the decision goes against the settlement, all parties will have to go back to the negotiation table, which is unlikely to be a good thing for B of A. Estimates as to how much more this particular case could cost the bank vary, but they've been as high as $60 billion, based upon numbers bandied about while Bank of America and monoline insurer MBIA were engaged in their own legal wrangling last year. That's probably excessive, but anything over the $8.5 billion already set aside will be painful.

If the settlement sticks, Bank of America will have a huge cloud lifted from its horizon, and its investors will likely heave a collective sigh of relief. Despite AIG's aggressive complaining, it was only one of 15 investors remaining in opposition by the last days of the hearing, while at least 60 were in favor. The vast majority of the parties want to see this thing resolved, and this fact may have an impact on the judge's decision. Either way, we will all know very soon.

The company that will change banking forever
Do you hate your bank? If you're like most Americans, chances are good that you answered yes to that question. While that's not great news for consumers, it certainly creates opportunity for savvy investors. That's because there's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional bricks-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. For the name and details on this company, click here to access our new special free report.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2804352, ~/Articles/ArticleHandler.aspx, 8/28/2015 6:31:08 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Amanda Alix

Foolish financial writer since early 2012, striving to demystify the intriguing field of finance -- which, contrary to popular opinion, is truly what makes the world go 'round.

Today's Market

updated Moments ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:04 PM
AIG $61.00 Down -0.11 -0.18%
American Internati… CAPS Rating: ****
BAC $16.36 Down -0.08 -0.49%
Bank of America CAPS Rating: ****
BNY $14.18 Down -0.12 -0.84%
Blackrock New York… CAPS Rating: No stars