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Mortgage-bond deal challenged

Bloomberg News / August 31, 2011

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NEW YORK - Bank of America Corp. has been sued by homeowners seeking to block the bank’s proposed $8.5 billion mortgage-bond settlement with investors.

The settlement would cause more foreclosures and fail to protect homeowners from Bank of America’s illegal servicing of loans, the group alleged yesterday in a complaint filed in federal court.

The settlement will “undermine federal programs designed to stabilize the housing market,’’ the four homeowners said.

Bank of America declined to comment.

Bank of New York Mellon Corp., the trustee for mortgage- securitization trusts covered by the settlement, was also named as a defendant. It did not immediately respond to an e-mail seeking comment.

Under the settlement, Bank of America would pay about $8.5 billion to resolve claims from investors in Countrywide Financial Corp. mortgage bonds.

The agreement, which is awaiting court approval, also includes mortgage-servicing provisions.

Bank of America acquired Countrywide in 2008.