DES MOINES, Iowa (AP) — The retirement fund for Iowa state employees would get a share of a proposed $500 million settlement of a lawsuit against Countrywide Financial Corp. and other companies that bundled securities backed by defective home mortgages.
The Iowa Public Employees’ Retirement System (IPERS) was the lead plaintiff in a 2010 lawsuit against Countrywide and other banks alleging they misled investors about the value of mortgage-backed securities that cost IPERS and several other retirement funds that joined its lawsuit hundreds of millions of dollars.
The plaintiffs, which include retirement funds for workers in Oregon and Orange County, Calif., and for the United Methodist Church, contend that they and other investors were sold $351 billion worth of Countrywide-backed securities from January 2005 until November 2007 that were eventually were downgraded to junk status. When the lawsuit was filed, IPERS estimated that its fund lost $28 million.
“We are pleased that Countrywide elected to negotiate a settlement with investors who were harmed by its securitization practices,” said Steven J. Toll, the lead attorney in the case. “This settlement will bring closure to investors who were misled about the quality of the mortgages that Countrywide securitized.”
The settlement agreement was reached with Bank of America Corp., which acquired Countrywide in 2008. It must be approved by a California federal judge. The amount each retirement fund will receive will be outlined in documents that are expected to be filed by the end of May.
Bank of America Chief Financial Officer Bruce Thompson said Wednesday that the bank felt “very good” about resolving some of the bank’s pension funds’ lawsuits. But he acknowledged uncertainty about how much the bank might have to spend on future litigation.
Bank of America has experienced significant fallout from its decision to buy Countrywide, which was known for making exotic loans. The purchase placed the bank among the largest mortgage lenders in the nation but also brought lawsuits, regulatory investigations, and hard-to-predict legal expenses.