Reuters-

American International Group (AIG.N) is holding “hostage” an $8.5 billion deal to compensate investors who bought Bank of America Corp (BAC.N) mortgage securities, supporters of the deal said in court filings ahead of a hearing on Wednesday.

The supporters urged the judge overseeing the deal to reject AIG’s efforts to delay its approval, according to documents submitted to the court late on Friday.

Bank of America agreed to the settlement in June 2011 to resolve claims by investors who had bought $174 billion of mortgage-backed securities issued by Countrywide Financial before the U.S. housing crisis. The investors said Countrywide, acquired by Bank of America in 2008, misrepresented the quality of the underlying home mortgages, which went sour in the crisis.

[REUTERS]