U.S. court narrows mortgage lawsuit against Bank of NY Mellon

 

Piggybankblog posted on 12/23/14

Repost from reuters.com

 

Dec 23 (Reuters) – A U.S. appeals court on Tuesday threw out most of the claims in an investor lawsuit against Bank of New York Mellon Corp as trustee for subpar mortgage-backed securities involved in an $8.5 billion settlement by Bank of America Corp.

The 2nd U.S. Circuit Court of Appeals in New York said Bank of New York Mellon did not have to face claims stemming from 25 of 26 trusts alleged to have contained risky mortgage loans from Countrywide Financial Corp, which was acquired by Bank of America in 2008.

The decision partially reversed a 2012 lower court ruling from U.S. District Judge William Pauley, who had thrown out a variety of other investor claims but had allowed claims related to the 26 trusts to proceed.

A lawyer for the plaintiffs did not respond to a request for comment. A Bank of New York Mellon spokesman said the bank was pleased with the decision.

The lawsuit was filed six weeks after Bank of America reached a $8.5 billion settlement in 2011 with investors over 530 mortgage securitization trusts that lost billions of dollars in the housing market collapse. Some investors complained the deal was too favorable to Bank of America.

Opponents of the accord are pursuing an appeal in New York state court, though the main objectors, led by American International Group Inc, have since settled their disputes with Bank of America.

The lawsuit claimed Bank of New York Mellon failed in its day-to-day duties as a trustee, including making sure the underlying home loans were properly documented and protecting the rights of bondholders.

It asserted claims on behalf of a class of bondholders who invested in the 530 trusts.

But Pauley said the pension funds could only pursue claims related to the 26 trusts in which they invested, rather than all 530 trusts covered by the $8.5 billion settlement.

The 2nd Circuit further narrowed the lawsuit by dismissing claims related to 25 of the trusts that were organized under New York law, leaving intact only claims related to a single trust organized under Delaware law.

The case is Retirement Board of the Policemen’s Annuity and Benefit Fund of the City of Chicago et al v. Bank of New York Mellon, 2nd U.S. Circuit Court of Appeals, No. 13-1776. (Reporting by Joseph Ax; Editing by Richard Chang)

 

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