Bank of America Settles Shareholder Suit, Led by Pennsylvania Pension, Over Mortgage-Backed Securities

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Bank of America on Friday disclosed that it had reached a $335 million settlement with shareholders, ending a lawsuit accusing the bank of misleading shareholders in 2009-10.

The suit, led by the Pennsylvania Public School Employees’ Retirement System, claimed that shareholders would never have bought BoA stock in 2009-10 if the bank had truthfully disclosed its exposure to sour mortgage-backed securities.

More details from Reuters:

Bank of America Corp has reached a $335 million settlement of a federal lawsuit accusing it of misleading shareholders about its exposure to risky mortgage securities and its dependence on an electronic mortgage registry known as MERS.

The second-largest U.S. bank disclosed the accord in its quarterly report filed on Friday with the U.S. Securities and Exchange Commission. It said it set aside enough reserves for the settlement as of June 30, and that final documentation and court approval are still needed.

Shareholders led by the Pennsylvania Public School Employees’ Retirement System claimed they had been misled into buying Bank of America stock in 2009 and 2010, including stock sold to repay $45 billion of federal bailout money.

They said the Charlotte, North Carolina-based lender knew it could not raise enough capital had it revealed it might have to buy back billions of dollars of securities backed by risky loans, including from the former Countrywide Financial Corp.

Shareholders also said the bank knew that record keeping in Merscorp Inc’s private Mortgage Electronic Registration Systems registry was so poor that it would not be able to legally foreclose on thousands of delinquent mortgages.

Neither the pension fund nor BoA had any comment on the settlement as of press time.

 

Photo by Sarath Kuchi via Flickr CC License

 

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