Janet Babin, Economic Development Reporter, WNYC News
Janet Babin is a reporter at WNYC covering economic development.
When Bank of America decided to buy troubled mortgage lender Countrywide Financial during the financial crisis of 2008, it many have underestimated the foreclosure costs that would come along with it.
Paul Miler, bank analyst at FBR Capital Markets, said the Countrywide purchase is costing Bank of America millions of dollars.
"Anybody that owns a loan that was originated by Countrywide, and it went bad, they're showing up at the doorstep of Bank of America and saying this was a fraudulent loan. We want you to buy it back," Miller said.
Bank of America is grappling with a slew of lawsuits related to those bad loans. Just this week, AIG sued Bank of America. Last month, the bank and Bank of New York Mellon, a trustee for some of the troubled loans, came to an agreement with 530 mortgage bond investors. Bank of America agreed to pay investors $8.5 billion.
But New York's Attorney General Eric Schneiderman, along with Delaware's Attorney General, are challenging the settlement.
"There are so many people who got bad deals and are stuck with those bad deals that are just seething at the sense that the bankers who put them in the bad deals aren't stuck with the deal," Schneiderman said. “They’re not stuck with taking responsibility for this.
Schneiderman said he wants relief for investors and borrowers, tying together the interests of investors and homeowners.
Bank of America President Brian Moynihan defended the settlement on CNBC. "We found a way that we could actually get something done and put it behind us," Moynihan said. "And I think it's fair to both parties and we'll let go through the court system."
Moynihan added that Bank of America is working through its issues.
But the investor lawsuits that just seem to keep coming won't help.
Even if the bank wins or settles some of them, it will still cost billions of dollars in legal fees to defend itself.