A Bloomberg report said a New York state judge has approved the proposed $8.5 billion settlement of Bank of America Corp with investors, which include BlackRock Inc and Pacific Investment Management Co. The settlement however, does not include the pact wherein it will be releasing some loan modification claims.
In behalf of over 500 residential mortgage-securitization trusts, Bloomberg said Bank of New York Mellon Corp filed a petition seeking an approval of the settlement in June 2011. The petition, said the news agency, was aimed to provide a resolution on claims that the loans-backed bonds have not met their desired quality.
On BofA's part, the settlement is part of the efforts of Chief Executive Officer Brian Moynihan to resolve the bank's liabilities, which are tied to faulty mortgages. The liabilities have cost the bank $50 billion at least since the 2008 financial crisis. Part of the cost has been inherited from the bank's acquisition of Countrywide Financial Corp also in 2008.
FBR Capital Markets Corp Paul Miller told Bloomberg in an interview, "This clears a big hurdle for Bank of America. It would've been a huge headache if it fell apart."
According to Bloomberg, pools of home loans that were securitized into bonds have contributed to the housing bubble, which in turn sent the US into a deep recession not seen since the 1930s.
In a judgement issued today, New York State Supreme Court Justice Barbara Kapnick in Manhattan approved BofA's accord with its investors. The entry of the ruling was delayed by Kapnick until February 7. Moreover, Kapnick's ruling allowed a continuance of some loan modification claims by investors. She said, "(The trustee)abused its discretion (on that issue) without exercising their potential worth or strength."
Kapnick, said Bloomberg, presided a nine-week hearing about the settlement, which showcased around two dozen witnesses who gave their testimonies in court. Among the witnesses is Bank of America's chief risk officer, Terrence P. Laughlin, who led the negotiations for the settlement on behalf of the lender.
