Bank of America Wins Order on $1 Billion in Colonial Bank Assets

August 13, 2009 by · Leave a Comment
Filed under: Industry News 

Bloomberg, New York Bank of America Corp. won a restraining order barring Colonial Bank, the Alabama lender under federal criminal investigation, from selling or otherwise disposing of $1 billion in cash and loans held by Colonial.

Colonial, based in Orlando, Florida, said last week it may be placed into receivership with the Federal Deposit Insurance Corp., after a planned Aug. 10 meeting with the Alabama State Banking Board. Details of the meeting weren’t disclosed.

U.S. District Judge Adalberto Jordan in Miami issued the order after Bank of America sued Colonial yesterday in Miami, claiming Colonial is holding the cash and loans as a custodian for Ocala Funding Inc. The order notes that the suit relates to more than 6,000 mortgages worth more than $1 billion.

“To the extent that the interests of the public are implicated in this case, they weigh in favor of requiring Colonial to honor its contractual obligations and avoiding what would amount to a $1 billion heist,” the judge said in an order posted online today.

Ocala is a commercial-paper vehicle sponsored by Taylor, Bean & Whitaker Mortgage Corp., the 12th-largest U.S. home lender, which received funding from Colonial. The commercial paper, or short-term IOUs, was backed by residential mortgages.

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