[1]Two of the country's biggest banks have agreed to pay tens of millions of dollars to settle a suit claiming they failed to protect investors of mortgage-backed securities (MBS) in the wake of the subprime crash.
According to a motion filed with New York's Southern District Court, Bank of America [2] and US Bancorp [3] agreed to pay $69 million to a number of state and local pension funds that lost millions from their investment in MBS purchased from Washington Mutual before its collapse in 2008.
In its suit, the investor group claimed Bank of America and US Bancorp knew the loans packaged in the Washington Mutual securities were riskier than advertised. The group further said that Bank of America and US Bancorp failed in their role as trustees by not forcing Washington Mutual to buy back the faulty mortgages after they went sour.
The settlement, which still needs approval from a federal judge, would close a case first brought in 2012. The banks tried unsuccessfully to dismiss the suit last year, arguing that their responsibilities as trustees were more limited than the investors claimed.