[1]A New York appeals court approved in full Bank of America's $8.5 billion settlement [2] with investors over the packaging and selling of faulty residential mortgage-backed securities by its Countrywide unit in the run-up to the financial crisis, according to multiple media reports [3].
The settlement was originally reached in June 2011. Thursday's ruling by the appeals court reversed a decision made by a New York State Supreme Court judge in January 2014 that Bank of America did not have to repurchase the faulty loans because the trustee, Bank of New York-Mellon, did not evaluate them properly.
The judge wrote in Thursday's ruling that the settlement was legal and that BNY Mellon showed "no indication that it was acting in self-interest or in the interests of Bank of America rather than that of the certificate holders."
According to reports, BNY-Mellon attempted to have the settlement approved in 2011, but was blocked by American International Group (AIG) over concerns of investor losses. AIG later sued Bank of America for $10 billion, but settled with the bank for $650 million in July 2014, after which AIG withdrew its objection to the settlement.
In all, the settlement included 22 institutional investors, which included BlackRock, MetLife, and Allianz SE's Pacific Investment Management, according to reports [4]. The investors claimed to suffer huge losses after much of a $174 million bundle of securities issued by Countrywide before the financial crisis later went into default.
A Bank of America spokesman declined to comment when reached by email.
Bank of America's January 2008 acquisition of the then-biggest residential mortgage lender in the nation, Countrywide Home Loans, for $4.1 billion has since cost the megabank at least $60 billion in settlements and legal expenses, including a record $16.65 billion settlement with the Department of Justice in August 2014 over the sales of faulty securities leading up to the financial crisis. The bank also agreed to pay $10 billion to Fannie Mae in January 2013 over similar issues.