This is a real shame. Bloomberg reports that Bank of American and Bank of New York have prevailed in their effort to have the $8.5 billion Bank of America mortgage settlement returned to state court in New York.
The use of a Article 77 proceeding for the settlement (a rarely-used New York state procedure) looked really sus, and the initial Walnut Place filing was very persuasive, and Judge William Pauley’s ruling approving the removal to Federal court was blistering (as in he was appalled by the conflicted role played by Bank of New York).
I attended the hearing on the appeal and I suppose should not have been surprised at the absence of anyone from New York attorney general Eric Schneiderman’s office. Even though he filed an objection to the settlement, the use of a Section 77 procedure (which has a strong presumption that the trustee is acting in good faith, which is clearly bogus in this case) places a very high bar for the settlement to be overturned. Had Schneiderman weighed in on the side of Walnut Place, the odds are high the ruling would have gone the other way.
And that is further compounded by the fact that the New York judge to which this case has been assigned, Barbara Kapnick, is widely depicted as at best bank friendly and at worst clueless. So this is a big win for Bank of America, since it looks like any scope of investigation will be severely limited and the deal will sail through. As we wrote before, this settlement is a screaming bargain relative to the liability that BofA faces on these deals.