Judge gives final approval to BofA's Countrywide $500M settlement
Los Angeles District Judge Mariana Pfaelzer approved the USD 500 million class action settlement of the Countrywide unit of Bank of America, according to a Bloomberg report. The settlement resolved the claims of investors that Countrywide duped them into purchasing faulty mortgage-backed securities.
Pfaelzer said the settlement was only fair since her previous decisions did not allow investors to claim damages from parent company Bank of America and that BofA also said in June that it could seek bankruptcy protection for Countrywide. Pfaelzer, who had already given tentative approval for the deal, said in her ruling, ""An immediate cash payout that avoids the risks and expenses associated with bankruptcy, protracted litigation, appellate review, and several legal challenges militates in favor of final approval."
Before Bank of America took over Countrywide in 2008, it was the biggest mortgage lender in the US. According to the report, investors had alleged that Countrywide did not reveal the quality of home loans pooled for securities that were sold to them. Most of the securities had high credit ratings but when the US housing market went bust, they were cut to junk and lost value.
In a phone interview with Bloomberg, Bank of America Spokesman Lawrence Grayson said they were pleased that the matter was already resolved. In a statement, investors' lawyer Steven J. Toll said the settlement was the biggest in the US as far as class action suits about mortgage backed securities were concerned.
The report said that the USD 500 million settlement is different from the settlement worth USD 8.5 billion that is still pending in a New York state court. That settlement, if approved, will resolve claims that Countrywide did not fulfill its obligations stated in the contract that it would replace delinquent mortgages pooled for securities, Bloomberg reported. The unit also still has to answer securities fraud allegations by investors who did not join the class action suit.