In 2011, Bank of America (BoA) agreed to pay out a settlement regarding charges leveled against Countrywide, which BoA had purchased. A number of mortgages were made through Countrywide on false pretenses, leaving mortgage bond investors with a number of loans that were defaulted on. Last month, after five years of further court debates, those investors are finally receiving their payouts.
The holdup was due to the fact that the Bank of New York Mellon had to make the settlement. The bank was serving as a trustee for the 530 mortgage-backed securities trust in the case, but it was called into question whether Bank of New York Mellow actually had the full authority to agree to a settlement. In May, a judge in New York declared that the bank did have that authority and approved the settlement payouts of 512 of the trusts in the case.
A report issued by Fitch Ratings states that investors did receive their portion of the $8.5 billion in settlement funds this month. The amount the 22 different institutional investors received for these trusts was determined by a third-party based on each loan's projected net losses over its lifetime.
In February 2016, the entire $8.5 billion was paid to Bank of New York Mellon. The delay between February and June was due to the bank seeking judicial guidance to determine the order in which to pay out funds.
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