Bank of America Corporation
) can now heave a sigh of relief as Justice Saliann Scarpulla has
approved the bank's proposed settlement of $8.5 billion, which
was put on hold for a long time. The settlement deals with the
sale of faulty mortgage-backed securities by Countrywide
Financial Corp. prior to the financial crisis.
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The distressed mortgage lender was acquired by BofA in 2008.
Thereafter, the company has been facing litigations associated
with the acquired units.
In 2011, BofA had reached an agreement with investors to pay $8.5
billion for its legacy Countrywide mortgage repurchase and
servicing claims. The group of investors included
American International Group
), Pacific Investment Management Co. and MetLife Inc.
The settlement was however resisted by the American International
Group on the grounds that
The Bank of New York Mellon Corporation
) - the trustee representing the investors - did not make
adequate effort to recover money for the distressed investors.
After a series of hearings, last month Justice Barbara Kapnick,
the prior judge of The New York state court in Manhattan was
close to approving the settlement. However, on her promotion,
Justice Saliann Scarpulla replaced her and the American
International Group got the opportunity to seek more time to have
Though the American International Group succeeded in delaying the
process, the final verdict overruled its claims and sanctioned
most clauses of the settlement. The judgment seems reasonable
enough as the company held a small proportion of the faulty
securities and therefore had to bear comparatively lower losses.
The unnecessary delay in the settlement was unfair to other
investors with larger stakes, who were waiting for the
Moreover, Justice Saliann Scarpulla's decision comes as a respite
for BofA as it somewhat eases the burden of legal hassles faced
by the company. Moreover, any contrary ruling might have resulted
in the company shelling out a larger sum than was initially
Despite this development, why has BofA's stock price lost nearly
2% on the day? The three major U.S. stock indices - NASDAQ
Composite, Dow Jones Industrial Average, and S&P 500 - slid
nearly 1%. Therefore, the overall negative market sentiment might
have restricted BofA's upward stock price movement.
At present, BofA has a Zacks Rank #3 (Hold).