NYT-
What is the duty of a trustee to protect investors?
The answer to that question is at stake in an $8.5 billion settlement that is awaiting approval by a justice in New York State Supreme Court. Early this week, the court will hear closing arguments in a case about the settlement struck by Bank of America and 22 mortgage securities investors two years ago. The settlement would resolve Bank of America’s legal liability for more than one million loans made by Countrywide Financial — now owned by Bank of America — during the mortgage mania. The court will decide whether the settlement is fair and reasonable and can go forward.
While this case may appear to be about Countrywide’s lending practices, what’s really on trial here is the role played in the settlement by Bank of New York Mellon, the trustee charged with protecting all investors in these securities. Trustees for asset-backed securities have a duty to ensure that the companies administering them, known as servicers, do right by the investors who own them.