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Court Approves $8.5 billion Bank of America Settlement

Bank of America‘s settlement agreement to pay $8.5 billion to mortgage investors was finally approved by the New York State appeals court, according to Reuters. This decision provided resolution to one of the bank’s last legal responsibilities related to the financial crisis.BankofAmerica

In 2011, the company agreed to settle with 22 institutional investors to resolve claims over $174 billion of mortgage securities issues by the former Countrywide Financial Corp. Many of these securities went into default after Bank of America bought Countrywide in 2008, leading to huge losses. But some investors claim the settlement did not pay them enough money, saying the Bank of New York Mellon Corp, which negotiated the deal, did not fight hard enough for them.

In the decision, Justice David Saxe wrote for a five-judge panel that the Bank of New York Mellon did not abuse discretion in arranging the settlement, but the court also said Barbara Kapnick, the state judge who approved the accord in January, erred in excluding claims by investors regarding loan modifications on the ground that the trustee didn’t properly investigate their strength, according to Reuters.

Saxe said Kapnick imposed too tough a standard on Bank of New York Mellon, "one that allows a court to micromanage and second guess the reasoned and reasonable, decisions of a trustee.”

"We therefore find that the trustee did not abuse its discretion in deciding to release the claims based on the failure to repurchase the modified mortgages, and we approve the settlement in its entirety," Saxe wrote.

The Retirement Board of the Policemen's Annuity and Benefit Fund of the City of Chicago led the appeal on behalf of objecting investors. The $8.5 billion agreement is separate from Bank of America's $16.65 billion mortgage settlement last August with federal and state authorities.

About Author: Samantha Guzman

Samantha Guzman is an award-winning visual journalist and graduate of the University of North Texas Mayborn School of Journalism. She specializes in visual storytelling and has skills in video, audio and photography, in addition to news writing. She has traveled to Mexico and Bosnia as an assistant for multiple multimedia projects and taught news writing, photojournalism, and narrative storytelling in the past.
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