By Jonathan Stempel and Nate Raymond NEW YORK (Reuters) - Bank of America Corp and US Bancorp have reached a $69 million settlement of litigation over their roles as trustees for securities backed by home loans from Washington Mutual Inc, which failed in 2008.
Lawyers for the investor plaintiffs called the settlement the first of its kind in a class action challenging the conduct of residential mortgage-based securities bond trustees.
It resolves claims by the pension funds that filed suit that the banks failed to protect investors from hundreds of millions of dollars of losses when home loans underlying the securities they bought soured.
The settlement was disclosed on Friday with U.S. District Court in Manhattan, and according to the plaintiffs provides an "immediate and favorable resolution" to the case.
Both defendants denied liability, and Bank of America would make the $69 million cash payment on behalf of itself and US Bancorp, the papers show. The accord requires approval by U.S. District Judge Katherine Forrest.
Bank of America spokesman Lawrence Grayson and US Bancorp spokesman Patrick Swanson declined to comment. Deborah Clark-Weintraub, a partner at Scott & Scott representing the plaintiffs, could not immediately be reached for comment.
The accord resolves a lawsuit filed in April 2012 by the Policemen's Annuity and Benefit Fund of the City of Chicago, and joined by many other pension funds and institutional investors.
Bank of America, which is based in Charlotte, North Carolina, and US Bancorp, which is based in Minneapolis, were accused of failing as bond trustees to properly oversee a few dozen WaMu trusts dating from 2005 to 2007.
According to the plaintiffs, the banks failed to properly take possession of loan files or ensure they were complete, or require WaMu to fix or buy back defective loans.
In court papers, the plaintiffs said their investments sank in value because of high loan default rates, foreclosure delays and substantial credit losses that would not have occurred "but for defendants' failure to perform their responsibilities."
Lawyers for the plaintiffs plan to seek from the settlement fund up to $13.8 million for legal fees and $3 million to cover expenses.
The lawsuit was filed a week after another federal judge in Manhattan let four pension funds pursue similar claims against Bank of New York Mellon Corp over its role as bond trustee for Countrywide Financial Corp, now part of Bank of America.
WaMu was the largest U.S. savings and loan before it failed on Sept. 25, 2008. JPMorgan Chase & Co bought most of its operations.
The case is Policemen's Annuity and Benefit Fund of the City of Chicago v. Bank of America NA et al, U.S. District Court, Southern District of New York, No. 12-02865.
(Reporting by Nate Raymond and Jonathan Stempel in New York; Editing by Leslie Adler)