July 6, 2011 / 9:58 PM / 7 years ago

Pension funds fear windfall in BofA $8.5 billion pact

NEW YORK (Reuters) - A group of public pension funds has launched a second challenge to Bank of America Corp’s (BAC.N) $8.5 billion settlement with investors in soured mortgage-backed securities.

In a filing Wednesday in the New York State Supreme Court in Manhattan, the group of four funds said the proposed settlement “may provide some investors with a windfall and may not appropriately compensate others for their actual loss.”

The funds want a chance to obtain documents and question officials from Charlotte, North Carolina-based Bank of America and all 22 institutional investors who negotiated the accord, which covers 530 separate trusts.

They said this is needed to help investors such as themselves, who own certificates issued by some of the trusts, decide whether the settlement is fair. That process is now “difficult,” they said.

Lawrence Grayson, a Bank of America spokesman, said the settlement “anticipated and provided for objections by those pursuing separate agendas, and we look forward to those issues being addressed by the court.”

The 22 institutional investors include BlackRock Inc (BLK.N), MetLife Inc (MET.N), Allianz SE’s (ALVG.DE) Pacific Investment Management Co and the Federal Reserve Bank of New York, among others.

    The settlement announced on June 29 was part of $20 billion of mortgage-related charges that Bank of America plans to take, hoping to resolve much of the liability from its 2008 purchase of mortgage lender Countrywide Financial Corp.

    On Tuesday, 11 companies that share the name Walnut Place, and which said they lost money on $1.06 billion of Countrywide securities, said they also plan to challenge the settlement.

    The funds named in Wednesday’s filing are the Policemen’s Annuity & Benefit Fund of Chicago; the Westmoreland County Employee Retirement System in Pennsylvania, and two Michigan funds: the City of Grand Rapids General Retirement System and the City of Grand Rapids Police and Fire Retirement System.

    Reporting by Jonathan Stempel, editing by Matthew Lewis

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