Bank of America and U.S Bank received final approval from a New York judge on their $69 million settlement involving a mortgage-backed securities class action lawsuit. This decision comes one week after the ruling that plaintiffs in a similar case could not intervene to oppose the deal, according to a report.
U.S. District Judge Katherine Forrest approved the settlement, which resolves allegations from investors that the banks failed in their role as trustees for mortgage-backed securities trusts containing sloppy loans that were issued by Washington Mutual Inc. before the 2008 financial crisis.
Judge Forrest previously ruled March 5 that a separate group of investors pursuing similar claims against U.S. Bank could not intervene for the purpose of objecting to the settlement. The institutional investors, including affiliates of investment manager BlackRock Inc. and Pacific Investment Management Company LLC, had objected to the settlement, saying it excludes them from the class, while simultaneously releasing their claims against U.S. Bank in a derivative action. The judge said the terms of the agreement didn’t bar those investors' claims.
Approximately $12.4 million of settlement funds will go to the plaintiffs' lawyers at Scott & Scott LLP, Cohen Milstein Sellers & Toll PLLC and Kessler Topaz Meltzer & Check LLP. In court papers, attorneys at those firms said the complaint had been one of the first to claim that trustees of residential mortgage-backed securities trusts had failed to adequately safeguard trust assets.
“This case was exceedingly complicated and complex,” Deborah Clark-Weintraub of Scott & Scott said during Thursday’s hearing. “It was very hard fought from start to finish.”
The suit was initially filed in April 2012. In an amended complaint in November 2013, the plaintiffs claimed that loans underlying the securities were plagued by delinquencies in borrower payments, credit losses and downgrades by rating agencies. The bank trustees were tasked with carefully monitoring the performance of the loans. Instead, they “stood by and did nothing” as the loans soured and reports emerged of widespread underwriting abuses at Washington Mutual, the amended complaint said.