BofA, U.S. Bancorp settle first bond trustee class action

Fri Nov 7, 2014 2:55pm EST
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By Jonathan Stempel and Nate Raymond

NEW YORK (Reuters) - Bank of America Corp and U.S. Bancorp have reached a $69 million settlement in a class action lawsuit over their roles as trustees for securities backed by risky mortgages from Washington Mutual Inc, which failed in 2008.

Lawyers for the investor plaintiffs called the settlement the first of its kind in a class action challenging the conduct of residential mortgage-based securities bond trustees.

The agreement resolves claims by pension funds that filed the lawsuit alleging the banks failed to protect investors from hundreds of millions of dollars of losses when home loans underlying the securities they bought soured.

The settlement was disclosed on Friday in papers filed with the U.S. district court in Manhattan.

Both defendants denied liability, and Bank of America would make the $69 million cash payment on behalf of itself and U.S. Bancorp, the papers show. The accord requires approval by U.S. District Judge Katherine Forrest.

Bank of America spokesman Lawrence Grayson and US Bancorp spokesman Patrick Swanson declined to comment.

Deborah Clark-Weintraub, a partner at Scott & Scott representing the plaintiffs, in an email said the settlement "represents an excellent recovery for class members."

The accord resolves a lawsuit filed in April 2012 by the Policemen's Annuity and Benefit Fund of the City of Chicago, and joined by many other pension funds and institutional investors.   Continued...

The Bank of America building is shown in Los Angeles, California October 29, 2014.    REUTERS/Mike Blake