BofA's (BAC) Settlement Chances Over $221B MBS Scheme Have Drastically Improved

February 28, 2012 8:47 AM EST
Bank of America (NYSE: BAC) shares are trading modestly higher pre-market Tuesday following reports of a favorable call for the bank -- certainly a rarity nowadays.

According to reports out late Monday, a federal court ruled BofA's $8.5 billion mortgage-bond settlement case should stay in state court, not move to federal court.

Moving the case back to the NY state court -- where it was originally filed -- is a positive for BofA. The move indicates the settlement might go through as currently drafted, offsetting fears the bank might have had to write a larger check in the deal. Further, the timeline on the settlement might be accelerated, potentially lifting the burden even more quickly.

The litigation stems from BofA's acquisition of Countrywide in 2008 and the sales of some $221 billion in junk mortgages to investors like the NY Fed, Goldman Sachs (NYSE: GS), MetLife (NYSE: MET), and others.

One investor who is smiling is Warren Buffett, who invested $5 billion in BofA last year for a favorable stake in its preferred shares.

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