Bloomberg News

BofA Seeks to Change Venue on $8.5 Billion Mortgage Deal

February 15, 2012

(Updates with lawyer’s remarks in third paragraph.)

Feb. 15 (Bloomberg) -- Bank of America Corp. and a group of investors that reached an $8.5 billion mortgage-bond settlement with the bank are seeking to overturn a ruling that kept the deal before a federal judge for review.

Bank of America, based in Charlotte, North Carolina, and the investor group, which includes BlackRock Inc., have said the settlement over Countrywide Financial Corp. mortgage bonds should be considered by a state court in New York, where it was first filed last year for approval.

“This case does not belong in federal court at all,” Charles Rothfeld, a lawyer for Bank of New York Mellon Corp., which is seeking approval of the settlement, said at a hearing today before the U.S. Appeals Court in Manhattan.

The accord would resolve claims from investors about defective Countrywide mortgages underlying their securities. The deal has the support of the investors that negotiated it, including BlackRock and Pacific Investment Management Co. American International Group Inc. and others are opposed or have demanded more information to evaluate it.

U.S. District Judge William Pauley in Manhattan in October ruled that the settlement should be considered in federal court for approval because it “implicates core federal interests in the integrity of nationally chartered banks and the vitality of the national securities markets.”

Class Action Fairness

Bank of America, the investor group and Bank of New York, the trustee for the mortgage securitization trusts, are asking the appeals court to overturn Pauley’s ruling. Under the federal Class Action Fairness Act, it should be returned to state court, they said in court papers.

“The decision below disrupts a streamlined state proceeding that BNYM invoked to determine the validity of a settlement that affects hundreds of trusts, thousands of investors, and billions of dollars,” Bank of New York said in a filing.

Entities under the name Walnut Place, which own Countrywide mortgage bonds, said the case should remain in federal court. Bank of New York is trying to obtain approval for one of the largest class-action settlements in history “without providing adequate protection” for investors, Walnut Place said.

“This is precisely the type of case that CAFA was designed to bring within the scope of federal jurisdiction,” Walnut Place said in court papers.

The case is Bank of New York Mellon v. Walnut Place LLC, 11-cv-05988, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Peter Blumberg, Andrew Dunn

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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