By Karen Freifeld
NEW YORK Nov 18 A lawyer for an investor group
on Monday urged a judge to approve Bank of America Corp's
proposed $8.5 billion settlement over mortgage-backed
securities that soured in the financial crisis, noting that not
one investor testified against the deal in a nine-week
Kathy Patrick, a lawyer for a group of institutional
investors who entered into the settlement, was summing up the
case in New York state court in Manhattan.
Bank of America agreed to the settlement in June 2011 to
resolve claims over shoddy mortgage-backed securities issued by
Countrywide Financial Corp, which the bank acquired 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.
Justice Barbara Kapnick of New York State Supreme Court
must decide whether to approve the deal, which would be binding
on all investors. It is unclear when she will rule.
In court on Monday, Patrick pointed out that, after nine
weeks of testimony, no investor had taken the stand and asked
the judge not to approve the settlement.
"How could you possibly reject this settlement as
unreasonable when not one of the investors has testified that it
is," Patrick, a partner with Houston-based Gibbs & Bruns,
implored the judge.
Patrick's closing statement followed a summation by Matthew
Ingber, a lawyer representing Bank of New York Mellon, the
trustee overseeing the securities, which also entered into the
Objectors to the settlement will present their closing
arguments on Tuesday.
"Approval of this settlement is a win for all certificate
holders," Ingber told the judge. He said the proceeding had
provided "overwhelming support" for the trustee's decision to
agree to the deal.
The $8.5 billion was "almost double" what Countrywide could
possibly have paid if the case was litigated, said Ingber, of
the global law firm Mayer Brown.
Countrywide had a maximum of $4.8 billion in assets for a
judgment on any claims, and some two dozen court decisions show
Bank of America likely would not be held responsible for
Countrywide's liability, Ingber 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 settlement also calls for some $3 billion worth of
improvements in loan servicing, including transferring high-risk
loans to subservicers, Ingber said.
Opponents to the deal now number 15, down from 44, Ingber
said, and constitute less than 7 percent of certificate holders
in the 530 trusts covered by the accord. The rest support the
deal through the trustee and investor group, he said.
In other words, 93 percent of securities holders support
the settlement, the attorney argued.
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.
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 in the run-up to
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.