August 2, 2010 / 9:38 PM / 9 years ago

Judge OKs Countrywide, KPMG $624 mln settlement

* Bank of America to pay $600 mln, KPMG $24 mln

* Investors say they were misled about mortgage risks

* Accord wins preliminary OK; final approval pending

* Shares of Bank of America rise 2.8 percent

NEW YORK, Aug 2 (Reuters) - A federal judge has granted preliminary approval to Bank of America Corp’s (BAC.N) and KPMG LLP’s $624 million settlement of a lawsuit alleging that Countrywide Financial Corp investors were misled about the mortgage lender’s lending practices.

Bank of America, which owns Countrywide, agreed in May to pay $600 million to resolve the class-action litigation. KPMG, which audited Countrywide, agreed to pay $24 million.

U.S. District Judge Mariana Pfaelzer granted preliminary approval to the settlement at a hearing on Monday in Los Angeles federal court, according to Joel Bernstein, a lawyer for the investors.

The judge indicated that a final fairness hearing on the settlement will likely be held on Nov. 15, Bernstein added.

The case was led by several pension funds, including the New York State Common Retirement Fund, that state’s $132.5 billion public pension fund, and five New York City pension funds. It was brought on behalf of investors in Countrywide securities between March 2004 and March 2008.

Countrywide was the largest U.S. mortgage lender before Bank of America bought it for $2.5 billion in July 2008.

The pension funds alleged that Countrywide, longtime Chief Executive Angelo Mozilo and other officials misled them about the lender’s reliance on subprime and “option” adjustable-rate mortgages to fuel rapid growth, while assuring them that Countrywide would survive a housing slump.

Mozilo, 71, and two other former Countrywide executives remain defendants in a U.S. Securities and Exchange Commission civil fraud lawsuit.

The SEC also accused Mozilo of insider trading over his alleged realization of more than $139 million of improper profit through the exercise of stock options in 2006 and 2007.

Bank of America is based in Charlotte, North Carolina. Countrywide was based in Calabasas, California.

Shares of Bank of America closed up 40 cents, or 2.8 percent, at $14.44 on the New York Stock Exchange.

The case is In re: Countrywide Financial Corp Securities Litigation, U.S. District Court, Central District of California, No. 07-05295. (Reporting by Jonathan Stempel in New York. Editing by Robert MacMillan)

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