Bank of America's record $500 million accord over Countrywide wins approval

Fri Dec 6, 2013 5:55pm EST
 
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By Jonathan Stempel

(Reuters) - A federal judge has granted final approval to Bank of America Corp's record $500 million settlement with investors who claimed they were misled by the bank's Countrywide unit into buying risky mortgage debt.

In a decision made public on Friday, U.S. District Judge Mariana Pfaelzer in Los Angeles called the accord fair, reasonable and adequate. She also awarded the investors' lawyers $85 million of fees plus $2.98 million for expenses.

Investors, including several public and union pension funds, had accused Countrywide of misleading them in offering documents between 2005 and 2007 about the quality of home loans underlying the securities they bought.

Many of those securities carried high credit ratings that tumbled to "junk" status as market conditions worsened.

Countrywide had been the largest U.S. mortgage lender before Bank of America bought it in July 2008.

The $500 million payout was the largest to resolve federal class-action litigation over mortgage-backed securities. It surpassed a $315 million accord with Bank of America's Merrill Lynch unit that won court approval in May 2012.

Bank of America had originally been sued over roughly $352 billion of securities, but Pfaelzer reduced that sum to about $15 billion by ruling that investors could sue only over securities they bought, not those with similar qualities.

Bank of America, based in Charlotte, North Carolina, is the second-largest U.S. bank.   Continued...

 
A Bank of America customer uses an ATM in Charlotte, North Carolina April 18, 2012. REUTERS/Chris Keane