BREAKING NEWS: Article 77 Hearing Postponed, Bill Frey Subpoenaed by AIG

I wanted to publish a quick update to yesterday’s article breaking down the challenges BofA will face to its $8.5 billion mortgage rep and warranty settlement.  Sources have informed me that the May 30 Merits Hearing for this settlement proceeding has, in fact, been postponed, with new date yet to be determined (likely several months hence).  There has of yet been no formal announcement on this, other than word-of-mouth from the court clerk.  However, my guess is that it has something to do with the the Intervenors’ Notice of Appeal regarding Judge Kapnick’s decision to strike Intervenors’ demand for a jury trial (h/t Manal Mehta).

In other breaking news, Bill Frey has been subpoenaed by AIG. I can only speculate that he will be asked about the circumstances that led Kathy Patrick to split off from the Investor Syndicate and encourage her clients to take a less confrontational approach to Bank of New York Mellon (BNYM) and BofA.

It has long been rumored that Frey developed specific evidence for the Investor Syndicate, which had been verified by Fannie Mae, of thousands of loan defaults in hundreds of Countrywide trusts.  If true, this would severely undermine one of the Institutional Investors’ main arguments supporting the settlement: that they were the only group that was taking action against Countrywide and that they were serious about recouping their constituents’ losses.

Since many of Kathy Patrick’s group of institutional investors were previously part of Tal Franklin’s larger Investor Syndicate, why did they fail to cite any of the specific evidence of default, which they must have known existed, in their letter to BNYM?  Instead, Patrick circulated an email, that has since been brought to light in these settlement proceedings, encouraging her clients not to put BNYM in default as it would “set back significantly the progress we have made to get to get BONY to consider an alternative rep and warranty strategy.”  This alternative strategy became the sweetheart deal for BofA that BNYM is now asking the court to bless in the Article 77 proceeding.

About igradman

I am an attorney, consultant, book editor, and one of the nation's leading experts on mortgage backed securities litigation. I am the author of The Subprime Shakeout mortgage litigation blog, a partner at Northern California law firm Perry Johnson, Anderson, Miller & Moskowitz, LLP, and the editor of the critically-acclaimed book, "Way Too Big to Fail: How Government and Private Industry Can Build a Fail-Safe Mortgage System," by Bill Frey. Follow me on Twitter @isaacgradman
This entry was posted in appeals, BofA, Event of Default, global settlement, Investor Syndicate, Judge Barbara Kapnick, jury trials, Kathy Patrick, specificity, William Frey. Bookmark the permalink.