Citigroup Comments On Bank of America Extension (BAC, BK)

This morning, Citigroup said that press reports indicate Bank of America BAC has entered talks with the parties that sent a letter in October relating to breaches of servicing responsibilities on 115 private label MBS deals, which gave BAC 60 days to respond in order to avoid an event of default that could ultimately remove BAC/CFC as servicer. “The parties involved include the NY Fed, Freddie Mac, Blackrock, Pimco, among other large investors,” Citigroup writes. “If BAC did not address the matter within 60 days, the next step for the investors would be to go to the trustee – which is Bank of New York Mellon Corp. BK – in order to petition for an event of default and have BAC/CFC removed as the servicer and appoint a new servicer, with the ultimate goal of obtaining access to the loan files to identify breaches of agreements. “However, both parties have agreed to extend the December 16th deadline as long as discussions continue, according to a statement by BAC.” Citigroup said that it's a tough call on whether this is an incremental positive or negative for Bank of America, which trades at $12.60. Bank of New York Mellon Corp. trades at $29.22.