Different Walnut Place entities that formed part of the Article 77 proceedings to ratify the Countrywide settlement have withdrawn as intervenors, Barclays Capital analysts noted in a report released this afternoon. Analysts cited a letter filed today with The New York State Supreme Court.
They made up the most vocal of the intervenors/objectors to the settlement and attempted to extend the scope of the discovery by asking to examine thousands of loan files. Meanwhile, Bank of New York Mellon, as trustee, had argued that this was not required.
The court eventually told Bank of America and Countrywide to only come up with roughly 150 loan files, and from other filings it seems that even those might not be immediately available to the intervenors, analysts said.
As a result, analysts' expectation was that discovery was likely to stay limited and the February/March 2013 hearing was likely to stay on schedule. Analysts continue to expect the settlement to be finalized in 1Q13-2Q13 and cash flows to deals within three months or so once it is finalized.
Analysts said that although Walnut Place was more vocal, it is not the only intervenor/objector to this proceeding. Other parties can continue to aggressively pursue discovery.
In terms of extending discovery, analysts think that investors need to pay attention to any documents filed by the bigger buyers still in the proceeding, including AIG. They should also be mindful of the roles played by the New York and Delaware attorneys general.
Since this settlement cash needs to be paid through a REMIC structure, the Internal Revenue Service's approval and state tax authorities will also be required and the eventual cash flows could still get delayed if those are not forthcoming. Investors can examine the effect of the settlement on the different bonds by running the Countrywide settlement option on the Barclays Mortgage Calculator, analysts said.