BofA, US Bancorp Settle Mortgage-Bond Suit for $69 MillionBob Van Voris
Bank of America Corp. and US Bancorp agreed to pay $69 million to settle a lawsuit with investors who said the banks failed to protect them in their role as trustees for securities backed by Washington Mutual Inc. home mortgages.
The investors, led by the Policemen’s Annuity and Benefit Fund of the City of Chicago and other public-pension funds, claimed in a suit filed in 2012 that the two banks “regularly disregarded” their duties as trustees, causing millions of dollars of losses.
The investors claimed Bank of America and US Bancorp knew that the mortgages underlying the securities were riskier than they were supposed to be and that mortgage loan files were incomplete. The banks failed to force WaMu to repurchase defective loans as required, the investors said.
The investors claimed they lost money on the securities when the mortgages failed at a higher rate than anticipated.
The settlement calls for the investors’ lawyers to get as much as $13.8 million in fees and $3 million in expenses.
The agreement must be approved by a federal judge in Manhattan before it can take effect. In court papers supporting the agreement, the investors said it resulted from four months of negotiation.
Seattle-based WaMu filed for bankruptcy protection in September 2008 after its banking unit was taken over by regulators and sold to JPMorgan Chase & Co. for $1.9 billion. The bank had more than 2,200 branches and $188 billion before $19 billion in losses from bad mortgages caused the biggest U.S. bank failure.
Before settling, the investors reviewed more than 3 million pages of potential evidence and participated in 33 witness depositions, they said in the court filing.
The case is Policemen’s Annuity and Benefit Fund of the City of Chicago v. Bank of America NA, 12-2865, U.S. District Court, Southern District of New York (Manhattan).