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 In a decision made public on Friday, U.S. District Judge Mariana
Pfaelzer in Los Angeles called the accord fair, reasonable and
adequate. She also awarded the investors' lawyers $85 million of
fees plus $2.98 million for expenses.
Investors, including several public and union pension funds, had
accused Countrywide of misleading them in offering documents between
2005 and 2007 about the quality of home loans underlying the
securities they bought.
Many of those securities carried high credit ratings that tumbled to
"junk" status as market conditions worsened.
Countrywide had been the largest U.S. mortgage lender before Bank of
America bought it in July 2008.
The $500 million payout was the largest to resolve federal
class-action litigation over mortgage-backed securities. It
surpassed a $315 million accord with Bank of America's Merrill Lynch
unit that won court approval in May 2012.
Bank of America had originally been sued over roughly $352 billion
of securities, but Pfaelzer reduced that sum to about $15 billion by
ruling that investors could sue only over securities they bought,
not those with similar qualities.
Bank of America, based in Charlotte, North Carolina, is the
second-largest U.S. bank.
OBJECTIONS OVERRULED
In approving the latest settlement, Pfaelzer overruled objections by
two groups of class members.
One group included the Federal Deposit Insurance Corp, acting as
receiver for 19 failed banks, and 16 institutional investors. They
said the settlement unfairly favored some investors over others and
that $500 million was not enough.
But Pfaelzer said there were "significant legal obstacles" to
recovering more, noting that the bank might try to attribute
investment losses to investor panic amid a "broader crisis in the
housing and credit markets."
The other objectors included a bank and a fund company that claimed
the accord released too many potential claims.
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A lawyer for the FDIC and the institutional investors referred a
request for comment to the FDIC. Greg Hernandez, an FDIC spokesman,
declined immediate comment.
Talcott Franklin, a lawyer for the other group of objectors, also
declined immediate comment.
The accord is separate from an $8.5 billion Bank of America
settlement over Countrywide securities that is pending in a New York
State court.
Bank of America is also awaiting a ruling on damages from U.S.
District Judge Jed Rakoff in Manhattan after a jury found it liable
for fraud over Countrywide's sale of defective mortgages to Fannie
Mae and Freddie Mac.
In August, the federal government filed two lawsuits in Charlotte
that accused Bank of America of understating the risks on about $850
million of mortgage securities.
Among the law firms to share in the $85 million of legal fees are
Robbins Geller Rudman & Dowd; Kessler Topaz Meltzer & Check; and
Cohen Milstein Sellers & Toll, court papers show.
The cases are in the U.S. District Court, Central District of
California. They are Maine State Retirement System v. Countrywide
Financial Corp et al, No. 10-00302; Western Conference of Teamsters
Pension Plan v. Countrywide Financial Corp et al, No. 12-05122; and
Luther v. Countrywide Financial Corp et al, No. 12-05125.
(Reporting by Jonathan Stempel in New
York; editing by Leslie Adler)
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