New York and Delaware won court permission to participate in litigation over Bank of America Corp.’s proposed $8.5 billion mortgage-bond settlement, defeating opposition by Bank of New York Mellon Corp., the trustee for investors.
U.S. District Judge William Pauley in Manhattan approved requests to intervene by New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden, according to an order filed Nov. 18.
“This action concerns far more than the financial interests of a few sophisticated investors,” the judge wrote. “The intervention of the state AGs in this action will protect the interests of absent investors.”
Bank of America has agreed to pay $8.5 billion to resolve claims from investors in Countrywide Financial Corp. mortgage-backed securities. The deal, reached with an institutional investor group that includes BlackRock Inc. and Pacific Investment Management Co., would apply to investors outside that group. Charlotte, North Carolina-based Bank of America bought Countrywide in 2008.
Schneiderman and Biden asked to intervene in the case, saying they sought to protect the interests of investors not involved in crafting the agreement. Schneiderman called the deal “unfair” to investors in a court filing, saying the payment is “far less than the massive losses investors have faced and will continue to face.”
“Today’s ruling is an important victory in Attorney General Schneiderman’s continued work to protect the integrity of New York’s global financial markets while providing meaningful relief to those who have suffered from the mortgage crisis,” Danny Kanner, a spokesman for Schneiderman, said in an e-mailed statement.
BNY Mellon, the trustee for the 530 mortgage securitization trusts covered by the agreement, had argued in court papers that the attorneys general didn’t have standing to intervene. The bank, which is seeking court approval for the settlement, has been accused by the New York attorney general of violating state law in its role as trustee.
Schneiderman claims BNY Mellon breached its duties to investors and engaged in “repeated fraud and illegality,” while Biden’s office said in a filing that the bank may have violated Delaware law. The two attorneys general are investigating mortgage practices of banks, including the bundling of mortgage loans in to securities.
Kevin Heine, a spokesman for New York-based BNY Mellon, said the bank has never opposed the intervention of any investor, and the proposed settlement allows for all investors to make their case before the court.
“However, we continue to respectfully believe that those interests are adequately represented without the intervention of state attorneys general,” he said in an e-mail.
The case is Bank of New York Mellon v. Walnut Place LLC, 11-cv-05988, U.S. District Court, Southern District of New York (Manhattan).