A New York appeals court on Thursday approved Bank of America’s $8.5 billion pact with investors over bad mortgages, potentially putting to rest a legal dispute that dates to 2011.
The Charlotte-based bank’s agreement covers 1.6 million loans that were packaged into securities from 2004 to 2008 by subprime lender Countrywide Financial and sold to big investors such as BlackRock. Bank of America bought Countrywide in 2008 and has since paid billions to cover lawsuits and penalties tied to the lender.
Bank of America negotiated the 2011 pact after the Countrywide loans had begun to sour. The bank has already set aside money for the agreement, but final court approval has been slow in coming.
Bank of New York Mellon, the trustee for the loans packaged into securities, helped orchestrate the settlement. But some investors objected to the agreement, arguing that the trustee didn’t represent their interests and was protecting itself from liability.
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In February 2014, a lower court judge approved the settlement, except for a provision involving loan modification repurchase claims. In its ruling Thursday, the appeals court approved the settlement in “all respects,” concluding Bank of New York Mellon “properly exercised its discretion in its settlement of all the claims.”
A person familiar with the matter said remaining objectors have 30 days to seek another appeal, but because Thursday’s decision was unanimous, the court can decline to hear the case if it wishes.
A Bank of America spokesman declined to comment.
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