Bank of America Awaits Judge's $8.5bn Settlement Ruling Over Mortgage Securities

An $8.5bn decision hangs over Bank of America as it awaits a judge's verdict that could take weeks or even months on its proposed settlement to its mortgage securities investors who lost out when the financial crisis tore through global markets from 2007.

That decision lies in the hand of New York state Supreme Court's Justice Barbara Kapnick. She must rule on if it was reasonable for the securities' trustee Bank of New York Mellon Corp to agree the settlement in June 2011. Under the rules, investors must accept the trustee's deal.

Most investors accept the settlement. This includes a 22-strong group of institutional investors, such as BlackRock and MetLife. However, a handful objects to the settlement and say it should be tens of billions of dollars bigger. This group is led by American International Group.

Matthew Ingber, a lawyer representing Bank of New York Mellon, claimed that "approval of this settlement is a win for all certificate holders."

He pointed out that the number of opponents to BofA's proposed settlement has dwindled from 44 down to 15 and amount for only 7% of all securities held.

However, New York attorney Beth Kaswan of Scott+Scott, representing the Chicago police pension fund, said the multi-billion settlement is "not fair and reasonable".

"BNY Mellon left billions of dollars on the negotiating table," she said, reported Reuters.

Banks across the world are paying out billions in settlements to past investors who say they were mis-sold mortgage-backed securities before the crisis.

In 2007, US sub-prime mortgage market blew up and so did many of the assets backed by home loans, triggering huge losses across the financial system and sparking a wave of investor litigation.