NY judge OKs BofA US$8.5 bil. settlement
February 3, 2014, 1:48 am TWN
WASHINGTON--A U.S. judge has approved an US$8.5 billion settlement between Bank of America and a group of investors for losses on dodgy mortgage-backed securities whose collapse triggered the 2008 financial crisis.
Justice Barbara Kapnick of the New York State Supreme Court green-lighted the 2011 accord Friday, rejecting demands to void it by some investors, including insurer AIG, who called it inadequate and alleged conflicts of interest, according to the decision seen by AFP.
Kapnick said the Bank of New York Mellon, representing the defrauded investors, “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” in negotiating the deal with Bank of America.
Hoping to put its disastrous 2008 purchase of mortgage lender Countrywide Financial behind it, Bank of America said in June 2011 it would pay US$8.5 billion to a group of large private investment groups that invested in securities which held poorly documented or substandard home loans from Countrywide.
At the height of the U.S. housing boom in the 2000s, Countrywide was the largest mortgage origination company in the United States.
Bank of America, saved from bankruptcy with public funds in 2009, has paid a hefty price for the “subprime” crisis.
In January 2013, it agreed to pay US$11.6 billion to settle claims on soured loans sold to government-backed mortgage finance giant Fannie Mae.
That settlement marked another milestone in Bank of America's efforts to extricate itself from the U.S. mortgage crisis that shook global financial markets in 2007-2008 and sparked the U.S. Great Recession.