Bank of America's settlement over mortgage wins judge's approval

Jan. 31, 2014 at 3:43 PM
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NEW YORK, Jan. 31 (UPI) -- A New York state judge approved an $8.5 billion agreement by Bank of America to settle most of the claims filed by mortgage securities investors.

Justice Barbara Kapnick of State Supreme Court ruled the 2011 settlement was reached in good faith, knocking down the challenge by AIG, which said the trustee overseeing the bonds wasn't aggressive enough to collect more money from Bank of America, the New York Times reported.

Lawyers representing AIG -- one of nearly two dozen mortgage securities investors -- argued the settlement didn't pay enough to investors and accused the trustee, Bank of New York Mellon, of shirking its duties.

"The trustee did not abuse its discretion in entering into the settlement agreement,'' Kapnick wrote. "And did not act in bad faith or outside the bounds of reasonable judgment."

Kapnick did rule claims by investors concerning loan modifications could stand because the trustee settled the claims "without investigating their potential worth or strength."

Bank of America has been engaged in several lengthy legal battles related to subprime lender Countrywide Financial, which the bank acquired in 2008. As part of Friday's settlement, Bank of America agreed to improve servicing Countrywide loans in the 530 mortgage-backed securities at issue in the case.

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