NEW YORK Nov 18 Bank of America Corp's proposed $8.5 billion settlement with investors in Countrywide Financial Corp mortgage-backed securities offers almost double what bondholders could recover through trial, a lawyer who helped negotiate the deal argued on Monday.
Matthew Ingber, a lawyer for Bank of New York Mellon, the trustee overseeing the securities, was summing up the case for the settlement in New York State Supreme Court in Manhattan in a proceeding seeking court approval of the deal.
Bank of America agreed to the settlement in June 2011 to resolve claims over shoddy mortgage-backed securities issued by Countrywide in the run-up to the financial crisis. Bank of America bought Countrywide in 2008.
Twenty-two institutional investors, including BlackRock Inc , MetLife Inc and Allianz SE's Pacific Investment Management Co, signed onto the accord.
Opponents of the settlement, whose numbers have dwindled, are led by American International Group Inc.
Bank of New York Mellon, as trustee, asked Justice Barbara Kapnick to approve the deal, which would be binding on all investors.
In court on Monday, Ingber argued that nine weeks of testimony provided "overwhelming support" for the trustee's decision to agree to the deal.
"Approval of this settlement is a win for all certificate holders," said Ingber, of global law firm Mayer Brown. "The trustee entered into the settlement because $8.5 billion was almost double what Countrywide would pay."
Countrywide had a maximum of $4.8 billion in assets to pay a judgment on any claims, and some two dozen court decisions show Bank of America likely wouldn't be held responsible for Countrywide's liability, he said.
"If we didn't lock in $3.7 billion more than Countrywide could pay under the best case scenario, we'd be lining up with every other plaintiff against Countrywide," Ingber said. "The trustee chose finality and certainty and it has eight-and-half billion-dollars to show for it."
The settlement also requires Bank of America to make improvements in mortgage servicing and to cure certain document issues, Ingber said.
Opponents of the deal have dwindled from 44 at the start of the hearing to 15 at the end, Ingber said, and constitute less than 7 percent of certificate holders in the 530 trusts covered by the accord.
The Federal Home Loan Banks of Boston, Chicago and Indianapolis withdrew their opposition on Nov. 1, as did hedge fund Cranberry Park.
The attorneys general of New York and Delaware, who intervened in the case two years ago, said in May they would not block the deal.
Twenty-two witnesses testified and 235 documents were entered into evidence during the nine-week proceeding, which has taken place intermittently since June.
Summations continue Monday afternoon with argument by Kathy Patrick, of Houston-based Gibbs & Bruns, who represents the 22 institutional investors who agreed to the deal.
Objectors to the settlement will offer their views on Tuesday.
The $8.5 billion deal has been viewed as a template for other banks to put behind them claims that they misrepresented the quality of mortgages underlying securities before the financial crisis.
JPMorgan Chase & Co on Friday said it agreed to pay $4.5 billion to settle claims by investors who lost money on mortgage-backed securities issued by the bank and Bear Stearns, which it took over in 2008.
The case is In re Bank of New York Mellon New York State Supreme Court, New York County, No. 651786/2011.