Bank of America will pay $8.5bn to mortgage bond investors to settle claims that the loans backing securities sold by the bank didn't meet quality standards
Bank of America will pay $8.5bn to mortgage bond investors to settle claims that the loans backing securities sold by the bank didn't meet quality standards.
The settlement was approved today by a New York State judge, according to a Bloomberg report. A petition seeking approval of the settlement was filed in June 2011 by Bank of New York Mellon Corp., trustee for about 500 of the residential mortgage-securitization trusts.
Many investors objected strenuously to the deal, claiming that total investor losses on the shoddy securities were more than $100bn, and that the settlement resolved the claims for only pennies on the dollar.
But New York State Supreme Court Justice Barbara Kapnick ruled that in reaching the agreement, Bank of New York Mellon “did not abuse its discretion in entering into the settlement agreement and did not act in bad faith or outside the bounds of reasonable judgment.” Kapnick did allow some loan modification claims to go forward, saying the trustee "abused its discretion" on those claims, Bloomberg reported.
That $8.5bn may not be the only check Bank of America will have to cut. The Justice Department has asked U.S. District Court Judge Jed Rakoff to fine the lender $2.1bn for its fraud conviction last year over shoddy loans sold by its Countrywide unit. BOA, on the other hand, has argued that it shouldn't have to pay the government anything.
The settlement was approved today by a New York State judge, according to a Bloomberg report. A petition seeking approval of the settlement was filed in June 2011 by Bank of New York Mellon Corp., trustee for about 500 of the residential mortgage-securitization trusts.
Many investors objected strenuously to the deal, claiming that total investor losses on the shoddy securities were more than $100bn, and that the settlement resolved the claims for only pennies on the dollar.
But New York State Supreme Court Justice Barbara Kapnick ruled that in reaching the agreement, Bank of New York Mellon “did not abuse its discretion in entering into the settlement agreement and did not act in bad faith or outside the bounds of reasonable judgment.” Kapnick did allow some loan modification claims to go forward, saying the trustee "abused its discretion" on those claims, Bloomberg reported.
That $8.5bn may not be the only check Bank of America will have to cut. The Justice Department has asked U.S. District Court Judge Jed Rakoff to fine the lender $2.1bn for its fraud conviction last year over shoddy loans sold by its Countrywide unit. BOA, on the other hand, has argued that it shouldn't have to pay the government anything.
