NEW YORK - Bank of America Corp.’s $8.5 billion settlement with mortgage-bond investors will be delayed almost two weeks after American International Group Inc. and other objectors asked a judge for a hearing to address loan modifications excluded from the accord.
New York State Supreme Court Justice Barbara Kapnick in Manhattan on Jan. 31 approved most of the bank’s 2011 deal to end claims by investors in more than 500 mortgage-security trusts that the loans backing the bonds didn’t meet promised quality. Kapnick refused to include claims Bank of America was required to repurchase modified loans, saying the trustee, Bank of New York Mellon Corp., failed to properly evaluate them.
The objectors yesterday asked Justice Saliann Scarpulla, who took the case when Kapnick moved to an appeals court, to delay the Feb. 7 entry of the ruling. They argued the modified-loan claims are a “significant piece” of the settlement and that the ruling leaves open questions as to how much of the settlement funds will go to the trusts, which trusts are covered by the accord, and how the funds will be divided.
Entry of a final judgment in the case “could leave the trust beneficiaries with no choice but to commence new, duplicative actions in order to protect their rights,” Mark C. Zauderer, an attorney for the objectors, said in a court filing. “The entry of final judgment should be stayed so that all issues relating to the enforcement or effectuation of the settlement may be litigated in this action.”
Scarpulla has scheduled a Feb. 19 hearing on the objectors’ request, delaying the Feb. 7 date Kapnick set for formal entry of the ruling. The judgment must be formally entered before any appeals can begin.
“This was simply a courtesy to all the parties involved and an opportunity to take a deep breath,” David Bookstaver, a spokesman for New York state’s Unified Court System, said in a telephone interview.