Borrowers Attempt to Block $8.5B Mortgage Settlement

Features Reuters

A group of borrowers sued Bank of America Corp to block its proposed $8.5 billion settlement over mortgage-backed securities losses, and dozens of additional investors lodged objections to that accord.

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The challenges were filed as investors who bought securities covered in the settlement faced a Tuesday deadline over whether to intervene in the case, which is overseen by New York State Supreme Court Justice Barbara Kapnick in Manhattan.

Among those to object is American International Group Inc , which is separately suing Bank of America for $10 billion for allegedly misrepresenting the quality of mortgage-backed debt it bought. Others that have objected include the Federal Deposit Insurance Corp, attorneys general of New York and Delaware, and a variety of banks, insurers and investment funds. Some objectors want to move the case to federal court.

The borrowers in the new lawsuit claim they are among the homeowners whose mortgages are contained in the 530 trusts covered by the $8.5 billion settlement.

They asked a federal judge to issue an injunction that blocks the settlement, and force Bank of America and Bank of New York Mellon Corp, the trustee that negotiated the accord, to properly service their loans.