Reuters: Regulatory News: New York, Delaware can intervene in BofA $8.5 bln pact

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New York, Delaware can intervene in BofA $8.5 bln pact Jun 6th 2012, 23:00 Wed Jun 6, 2012 7:00pm EDT * Judge says intervention will not cause delay or burden * Metlife, Pimco among 22 investors that agreed to deal * States raised questions about reasonableness of accord By Karen Freifeld NEW YORK, June 6 (Reuters) - New York's attorney general and the Delaware Department of Justice can intervene in Bank of America Corp's proposed $8.5 billion mortgage bond settlement, a judge ruled on Wednesday. Both states identified legitimate interests in protecting the integrity of the marketplace, New York state Supreme Court Justice Barbara Kapnick wrote in granting the states' motions to join in the proceeding. The judge, who must decide whether to approve the settlement, said she was not persuaded by arguments from supporters of the settlement that the intervention "would somehow be the source of undue delay or burden." Bank of America declined to comment on the ruling. New York Attorney General Eric Schneiderman said in a statement that he sought involvement in the case because the settlement is far less than the "massive losses investors have faced and will continue to face." Schneiderman had raised questions about the "fairness and adequacy" of the proposed settlement, saying investors would receive only a few pennies on the dollar for losses suffered. Delaware has also raised questions about the reasonableness of the settlement. A spokesman for the Delaware Department of Justice had no immediate comment on the ruling. Under the proposed settlement, Bank of America would pay $8.5 billion to settle claims that its Countrywide unit sold low-quality mortgage-backed securities that went bad when the housing boom collapsed. In 2008, Bank of America bought Countrywide Financial Corp, once the nation's largest mortgage lender. The deal, announced in June 2011, was negotiated by Bank of New York Mellon Corp as trustee for 530 residential mortgage-securitization trusts, with an estimated $174 billion of unpaid principal. Twenty-two institutional investors signed onto the deal, including BlackRock Inc, Metlife Inc and Allianz SE's Pacific Investment Management Co, while several other groups of investors complained about the payout. Schneiderman's goal in joining the case "is to make sure that those who had no voice in the negotiation of this settlement are treated fairly and this ruling makes that possible," his office said in the statement. A spokesman for Bank of New York Mellon declined to comment on the ruling. Bank of New York Mellon and the institutional investors had objected to the states' intervention, saying they didn't have standing to block the settlement of claims on behalf of sophisticated private investors. The case had been moved to federal court, which allowed the states to intervene. It was then sent back to state court. The case is In the Application of The Bank of New York Mellon, New York State Supreme Court, New York County, No. 651786/2011. Link this Share this Digg this Email Reprints

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