BofA $500 Million Countrywide Settlement Wins Approval
Bank of America Corp.’s Countrywide unit won final approval of a $500 million class-action settlement with investors who claimed they were duped into buying its mortgage-backed securities.
U.S. District Judge Mariana Pfaelzer in Los Angeles said the settlement was a fair outcome because her previous rulings prevented the investors from recovering damages from Bank of America as Countrywide’s parent and because the Charlotte, North Carolina-based bank said as recently as June that it might put Countrywide in bankruptcy.
“An immediate cash payout that avoids the risks and expenses associated with bankruptcy, protracted litigation, appellate review, and several legal challenges militates in favor of final approval,” Pfaelzer said in her ruling yesterday. She tentatively approved the deal earlier.
The settlement resolves claims that Countrywide, the largest U.S. mortgage lender when it was taken over by Bank of America in 2008, misled investors in offering documents about the quality of the home loans that were pooled for the securities. Many of the securities had been given the highest credit ratings and lost value when they were cut to junk during the collapse of the U.S. housing market.
New York Case
The $500 million deal is separate from an $8.5 billion settlement pending in state court in New York that will resolve claims that Countrywide breached its contractual obligation to replace delinquent mortgages that were pooled for the securities.
“We’re pleased to resolve this matter,” Lawrence Grayson, a Bank of America spokesman, said today in a phone interview.
Steven J. Toll, a lawyer for the investors, said in statement that the settlement was the largest in the U.S. in a class action suit over mortgage backed securities.
Countrywide still faces securities fraud claims by investors who opted out of the class-action case after Pfaelzer excluded claims for securities that weren’t owned by investors who filed the very first cases against Countrywide as early as 2007 in California state court.
The case is Maine State Retirement System v. Countrywide Financial Corp., 10-00302, U.S. District Court, Central District of California (Los Angeles.)
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