Bank of America's Countrywide unit will pay $500 million to settle a class-action lawsuit brought by investors who claim they were duped into buying faulty mortgage-backed securities (MBS).
As per a Bloomberg News report, U.S. District Judge Mariana Pfaelzer in Los Angeles said she was pleased the parties reached an agreement when they did, as Bank of America has been considering placing its Countrywide unit into bankruptcy, which would have prevented the investors from recovering damages.
‘An immediate cash payout that avoids the risks and expenses associated with bankruptcy, protracted litigation, appellate review and several legal challenges militates in favor of final approval,’ Pfaelzer said in her ruling late last week, as per the report.
The deal with investors is separate from an $8.5 billion settlement pending in state court in New York stemming from investor claims that Countrywide failed to meet its contractual obligation to replace delinquent mortgages that were pooled for securities.