| NEW YORK
NEW YORK Feb 4 A new judge presiding over Bank
of America Corp's proposed $8.5 billion settlement with
investors in soured mortgage securities on Tuesday postponed
entering a final judgment in the case, raising the possibility
of additional legal maneuvers.
Justice Saliann Scarpulla of New York state court in
Manhattan, who took over the case this week, agreed to delay the
decision from taking effect until at least Feb. 19, according to
lawyers involved in the case.
Scarpulla's decision came just four days after Justice
Barbara Kapnick approved the settlement with the investors, who
had bought securities issued by mortgage lender Countrywide
Financial Corp. Bank of America acquired Countrywide during the
In her ruling last Friday, Kapnick said the ruling would
take effect on Feb. 7. Kapnick's decision came on her last day
as a trial court judge. She was promoted to a state appeals
court effective Feb. 3, and most of her cases were handed over
On Tuesday, American International Group Inc, which
led investors who opposed the settlement, sought a further
delay. A postponement was necessary so that the "many issues
that were left open" in Kapnick's decision could be litigated,
AIG's lawyer, Mark Zauderer, wrote in court papers.
Scarpulla agreed to the delay at a court hearing later on
Tuesday, lawyers involved in the case told Reuters.
Lawrence Grayson, a spokesman for Bank of America, declined
to comment on the delay.
Kevin Heine, a spokesman for Bank of New York Mellon,
the trustee for the mortgage securities, also declined to
Bank of America agreed to the settlement in June 2011 to
resolve the claims of investors in 530 residential
mortgage-backed securities trusts issued by Countrywide before
the U.S. housing crisis. The investors said Countrywide
misrepresented the quality of the underlying home mortgages.
A group of 22 investors supported the settlement, including
institutions such as BlackRock Inc, MetLife Inc
and Allianz SE's Pacific Investment Management Co.
But other investors, led by AIG, said there was no evidence
the settlement would adequately compensate them for their losses
and tried to block approval of the deal in a New York state
In her ruling on Friday, Kapnick wrote that Bank of New York
Mellon, the trustee representing investors, had acted mostly in
good faith in entering into the settlement. But she withheld her
approval for one part of the settlement in which she said the
trustee had failed to investigate claims regarding Bank of
America's obligations to repurchase modified loans.
Bank of America said on Friday it did not expect Kapnick's
exception to hold up the accord.
But in its court papers on Tuesday, AIG said Scarpulla
should withhold final judgment until she conducts further
proceedings to determine how losses will be calculated and how
the settlement money will be distributed.
Kenneth Warner, a lawyer representing the 22 investors who
support the settlement, said in a letter to the judge that a
delay would be "prejudicial to the thousands of
certificateholders who are waiting for the settlement proceeds
to be distributed."
John Moon, a lawyer who represents the Triaxx funds, which
also oppose the settlement, said he was still assessing the
impact of Kapnick's decision. "No one knows what's going to
happen, but all indications are this is going to be a very
vociferous fight," Moon said.
The case is In re Bank of New York Mellon, New York State
Supreme Court, New York County, No. 651786/2011.