BofA $8.5 Billion Deal Won’t Face New York Objection

Bank of America Corp.’s effort to complete an $8.5 billion settlement with mortgage-bond investors won’t face objections from New York and Delaware, which had intervened in litigation over the deal.

New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden said they won’t seek to block it, saying investors have benefited from litigation. New York had previously said the deal represented “a tiny percentage” of investor losses.

“Our intervention in this matter helped ensure a full, thorough and transparent process,” Damien LaVera, a spokesman for Schneiderman, said today in a statement. “As a result, what remains is a commercial dispute among sophisticated parties who are well represented.”

The move comes almost two years after the settlement was filed in New York state court for approval with backing from an investor group that includes Pacific Investment Management Co. The deal, which would resolve claims from investors in Countrywide Financial mortgage bonds, is set to be considered by a judge at a hearing starting May 30. Charlotte, North Carolina- based Bank of America acquired Countrywide in 2008.

American International Group Inc. (AIG) argued in a court filing today that New York State Supreme Court Justice Barbara Kapnick in Manhattan should reject the deal. The insurer said the settlement is “unreasonably and unjustifiably small” and “severely understates” Bank of America’s liability.

AIG Objection

“The resulting settlement is a pennies-on-the-dollar bargain for BofA that woefully undercompensates” investors, AIG and other investors said in the filing.

Lawrence Grayson, a Bank of America spokesman, declined to comment on the filings by AIG and the attorneys general.

The Federal Housing Finance Agency, the regulator for mortgage finance companies Fannie Mae (FNMA) and Freddie Mac (FMCC), said today it was withdrawing a “conditional objection” filed in 2011 in which the agency said it needed more information to evaluate the agreement.

Schneiderman and Biden said in their joint filing that when the settlement was submitted in state court in June 2011, it was an agreement of “unprecedented size and complexity,” while Bank of New York Mellon Corp., the trustee seeking approval for the agreement, was offering “minimal disclosure” to investors. After almost two years of litigation, “fulsome adversarial examination” of the deal has occurred ahead of the approval hearing, the states said.

‘Unsettled’ Issues

“The attorneys general do not express a view as to the unsettled substantive issues of the settlement’s adequacy,” they said.

New York said in a court filing last year that there were “serious questions about the fairness and adequacy” of the settlement and that the facts “suggest that the proposed settlement is unfair.” Biden’s office said in 2011 that it had “significant concerns that the proposed settlement does not adequately remedy the harm suffered by the beneficiaries.”

“We are satisfied that a sufficiently transparent process has developed in which all parties are fully able to present their sides to the court, and we believe the court will be able to conduct a thorough evaluation and resolve these issues fairly and impartially,” Jason Miller, a spokesman for Biden, said in a statement.

Kevin Heine, a BNY Mellon spokesman, said the bank is pleased New York, Delaware and the FHFA aren’t opposing approval.

“We continue to believe that we have carried out our duties as trustee under the governing documents and acted in the best interests of the certificate holders,” he said in a statement.

The case is In the matter of the application of the Bank of New York Mellon, 651786-2011, New York State Supreme Court (Manhattan).

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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