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Th e M Rep o RT | 61 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET local edition local edition ANALYTICS court approves $8.5 billion Bank of america settlement The seTTlemenT awards insTiTuTional invesTors harmed during The financial crisis by Toxic securiTies from counTrywide. new york // Bank of America's settlement agreement to pay $8.5 billion to mortgage investors was finally approved by the New York State appeals court, according to Reuters. This decision provided resolution to one of the bank's last legal responsibilities related to the financial crisis. In 2011, the company agreed to settle with 22 institutional investors to resolve claims over $174 billion of mortgage securities issued by the for- mer Countrywide Financial Corp. Many of these securities went into default after Bank of America bought Countrywide in 2008, leading to huge losses. But some investors claim the settle- ment did not pay them enough money, saying the Bank of New York Mellon Corp., which negotiated the deal, did not fight hard enough for them. In the decision, Justice David Saxe wrote for a five-judge panel that the Bank of New York Mellon did not abuse discre- tion in arranging the settlement, but the court also said Barbara Kapnick, the state judge who approved the accord in January, erred in excluding claims by investors regarding loan modifi- cations on the grounds that the trustee didn't properly investi- gate their strength, according to Reuters. Saxe said Kapnick imposed too tough a standard on Bank of New York Mellon, "one that allows a court to micromanage and second guess the reasoned and reasonable decisions of a trustee." "We therefore find that the trustee did not abuse its discre- tion in deciding to release the claims based on the failure to repurchase the modified mortgag- es, and we approve the settlement in its entirety," Saxe wrote. The Retirement Board of the Policemen's Annuity and Benefit Fund of the City of Chicago led the appeal on behalf of objecting investors. The $8.5 billion agree- ment is separate from Bank of America's $16.65 billion mortgage settlement last August with fed- eral and state authorities. citi, goldman, UBs to Pay $235m in rmBs settlement The major financial insTiTuTions seTTled claims of misrepresenTaTion of rmbs sold prior To The financial crisis. new jersey // Three financial institutions—Citigroup Global Markets, Goldman Sachs, and UBS Securities—agreed to a $235 million settlement with a pension fund to resolve allega- tions of fraud on the part of the underwriters involving residen- tial mortgage-backed securities (RMBS) sold by Residential Capital, according to media reports. The plaintiffs in the case, New Jersey Carpenters Health Fund, filed a motion for pre- liminary settlement approval in mid-February to end a lawsuit involving the sale of RMBS to the health fund and other inves- tors by Residential Accredited Loans, Inc. (RALI) and other af- filiates during the run-up to the financial crisis in 2006 and 2007. According to the class-action lawsuit, which was originally filed in September 2008, the underwriters made "mate- rial misstatements and omis- sions of material facts" in the offering documents, which was in violation of the Securities Act. The complaint also alleged Residential Capital and the de- fendant underwriters "failed to conduct adequate due diligence with respect to the originators' compliance with the loan under- writing guidelines stated in the offering documents." According to the complaint, Residential Capital and the underwriter defendants also failed to disclose weaknesses in the loans for 59 offerings. The plaintiffs alleged Residential Capital, which had become one of the world's larg- est issuers of mortgage-backed securities, sought out ratings agencies that gave favorable rat- ings to its subprime mortgages. These mortgages later received junk ratings when they went into default or foreclosure, ac- cording to the plaintiffs. The defendants gained a partial victory in 2010 when a district judge threw out 55 of the offerings, leaving just four at issue in the case; however, on appeal, 13 of the offerings were restored to the case in April 2013, according to the motion filed in February. A partial settlement was reached three months later in July 2013 when the issuing defendants agreed to pay $100 million in cash to resolve the claims against them. The $235 million settlement was originally reached in November 2014 and agreed to in February, pushing the total of settlements in the case up to $335 million. "Over seven years, the case had many difficult twists and turns, including an initial denial of class certification that would have meant an end to the case had we not kept pursuing it," said Joel Laitman, attorney for the New Jersey Carpenters Health Fund. "In the end, it is a favorable result for investors, particularly in light of continued risks." Spokespeople from Goldman Sachs and Citigroup declined to comment on the settlement. Representatives from UBS were not immediately available for comment.

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