BlackRock Inc. and other investors agreed to an $8.5 billion settlement with Bank of America Corp. over mortgage loans rather than risk litigation and the bankruptcy of its Countrywide Financial unit, a lawyer for the investors said.
The accord came after the investors were told by Bank of America that it had clearance from a federal banking regulator to put Countrywide, which was facing investor claims over defective loans, into bankruptcy, Kathy Patrick, an attorney for the investor group, said in court today.
“This was the concrete choice: $8.5 billion in hand or a coin flip,” on litigation against Bank of America, she said. “It would have been imprudent, it would have been unreasonable in the extreme, to subject certificate holders to that risk.”
The BlackRock group, which also includes Pacific Investment Management Co. and MetLife Inc., is asking Justice Barbara Kapnick of New York State Supreme Court in Manhattan to approve the settlement, which was reached in June 2011. The hearing on approval started Monday.
The agreement would resolve claims from mortgage-bond investors over Countrywide loans packaged into securities. It is opposed by an investor group led by American International Group Inc.
Patrick, of the law firm Gibbs & Bruns LLP, said that Bank of America Chief Risk Officer Terrence Laughlin told investors that the Charlotte, North Carolina-based lender had clearance from the federal Office of the Comptroller of the Currency to put Countrywide into bankruptcy “if that’s what was necessary to protect Bank of America.”
