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BofA Pays AIG $650 Million to Settle Mortgage Disputes

news.yahoo.com | July 21, 2014

By Karen Freifeld

NEW YORK (Reuters) - Bank of America Corp agreed to pay the insurer American International Group Inc $650 million to settle long-running legal disputes over defective mortgage-backed securities that the bank sold in the run-up to the financial crisis.

The settlement which the parties announced on Wednesday ends securities fraud litigation brought by AIG against the bank.

It also removes the biggest obstacle to the bank's $8.5 billion settlement with investors in mortgage securities issued by Countrywide Financial Corp, the mortgage lender Bank of America acquired in July 2008.

AIG agreed to dismiss litigation in New York and California that accused the bank of fraudulently causing billions of dollars in losses by selling it shoddy mortgage securities. It originally sought $10 billion of damages in the New York case.

For the past three years, AIG has also led opponents of Bank of America's $8.5 billion settlement in June 2011 with institutional investors to resolve claims that Countrywide misrepresented the quality of home loans underlying $174 billion of mortgage-backed securities it issued before the housing crisis.

Twenty-two institutional investors, including BlackRock Inc , Allianz SE's Pimco and Metlife Inc had agreed to the settlement, with the Bank of New York Mellon Corp serving as trustee.

AIG claimed the settlement undervalued its claims, and had been appealing January's approval by Justice Barbara Kapnick in New York state court of the bulk of the settlement.

In agreeing to drop its appeal, AIG said it will accept a pro rata share of whatever investors recover. A group of funds known as Triaxx and a pension fund for Chicago police remain as objectors.

A spokesman for Bank of New York Mellon declined to comment. A lawyer for Triaxx declined to comment, while a lawyer for the Chicago pension fund did not immediately respond to a request for comment.

Bank of America said it had set aside reserves by June 30 for the $650 million settlement, which also resolves three actions it brought to collect mortgage insurance proceeds from AIG's United Guaranty unit on loans it had originated and serviced.

The cases are American International Group Inc et al v. Maiden Lane II LLC, U.S. District Court, Southern District of New York, No. 13-00951; American International Group Inc et al v. Bank of America Corp et al, U.S. District Court, Central District of California, No. 11-10549, and In re: The Bank of New York Mellon, New York State Supreme Court, New York County, No. 651786/2011.

(Reporting by Karen Freifeld; Additional reporting by Jonathan Stempel; Editing by Lisa Von Ahn and Diane Craft)

 

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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