CHICAGO, April 26, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog includeAmerican International Group Inc. (NYSE: AIG), Bank of America Corporation (NYSE: BAC), The Bank of New York Mellon Corporation (NYSE: BK), MetLife Inc. (NYSE: MET) and BlackRock Inc. (NYSE: BLK).
Here are highlights from Wednesday's Analyst Blog:
AIG Denied Intervening in BofA Deal
On Tuesday, as reported by Reuters, American International Group Inc.'s (NYSE: AIG) attempts to intervene in Bank of America Corporation's (NYSE: BAC) $8.5 billion mortgage bond settlement case were spurned. New York state Supreme Court Justice Barbara Kapnick not only dismissed the allegations of AIG, but also of the other investors.
Reasons Behind AIG's Opposition
Along with a group of investors, AIG had earlier opposed BofA's deal, citing the settlement as substantially inadequate. They wanted the settlement deal to come under Article 77, a special proceeding under which the scope of inquiry would amplify in the form of plenary action.
According to AIG, conversion of the settlement case into limited proceeding will provide the investors with a chance to scrutinize and consider whether the compensation offered to them by BofA was sufficient and without any involvement of its personal gains.
AIG claimed that The Bank of New York Mellon Corporation (NYSE: BK), Countrywide's mortgage-backed securities (MBS) trustee, and several institutional investors manipulated the deal in such a way that the investors could not make out if the settlement was in their favor.
However, it appeared that AIG's intention to interfere in the settlement deal was hugely influenced by its separate individual court case against BofA. This lawsuit was filed to recover a $10 billion loss on mortgage investments, which according to AIG occurred due to misrepresentation by BofA.
Objections in the Past
In March 2012, a similar lawsuit filed against BofA by a group of investors, led by Walnut Place group, was also dismissed. The litigation had charged BofA's Countrywide Financial Corp. unit, which the bank acquired in 2008, of making wrong representations and warranties about the loans that backed these securities.
Earlier in this month, New York's Attorney General (AG) Eric Schneiderman opposed the deal. According to the AG, the compensation that BofA is giving to the investors is inadequate compared to the losses incurred. The objection to the mortgage settlement deal comes after the case was transferred from the federal to the state court in late February.
Earlier, in August 2011, the New York AG had raised an objection against the deal and won the approval of the federal court judge to intervene and take part in the case. But, with the settlement deal again transferred to the state court, he has to file for the permission to participate in the case again.
The Story Behind
In June 2011, BofA had entered into an agreement to pay $8.5 billion for its legacy Countrywide mortgage repurchase and servicing claims. This deal was struck between BofA, BNY Mellon, Pacific Investment Management Co., MetLife Inc. (NYSE: MET), BlackRock Inc. (NYSE: BLK) and a group of about 20 investors who suffered huge losses for their investments in MBS that were sold by Countrywide prior to the housing market failure.
The agreement basically covered most of BofA's legacy Countrywide- issued first-lien MBS repurchase exposure. It represented 530 trusts with original principal balance of $424 billion and total current unpaid principal balance of about $221 billion.
The dismissal of the lawsuits filed by AIG and Walnut Place, the two key complainers of the settlement deal, will provide the much needed conviction to BofA's efforts to successfully close the settlement deal.
On the other hand, the acquisition of Countrywide resulted in elevated mortgage exposure for BofA, compared with its peers. Following the collapse of the housing market, mortgage repurchases claim risk for the company grew manifold. This has significantly drained the company's bottom line over the last several quarters.
Moreover, with the new objections raised by the New York AG, there might be a delay in getting the approval. However, if the AG participates in the settlement deal, the investors will have a chance to get a better deal from BofA.
Currently, the shares of BofA have a Zacks #3 Rank, which translates into a short-term Hold rating. Additionally, we maintain our long-term Neutral recommendation on the stock.
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.