An $8.5 billion settlement might seem enormous, but it depends on the context. In the case of Bank of America and its mortgage bond investors, it's a mere pittance. As explained when the settlement was announced last week, it covers around $424 billion in mortgage securities issued, which amounts to about a 2% recovery. Some investors don't think that's enough.

A group of them intend to challenge the settlement. Shira Ovide at the Deal Journal reports on the three reasons why. The first one you already knew: it's not enough money. But that's not all. Surveying the group's filing, Ovide learns that the group also believes that the settlement process was fundamentally flawed because the investors who agreed were conflicted and the process was secret and unfair. Here's an excerpt she pinches from the filing on the alleged conflict:

"[M]any of these 22 investors have substantial ongoing business relationships with Bank of America other than their ownership of certificates in Countrywide-sponsored trusts. For example, BlackRock Financial Management, Inc., is one of the 22 investors. During the time in which the Settlement Agreement was being negotiated, Bank of America owned up to 34 percent of BlackRock....Many other of the 22 investors also have substantial business dealings with Bank of America or its subsidiaries other than their ownership of certificates in Countrywide-sponsored trusts."

Of course, settlements are often less severe when an ongoing relationship exists between the parties involved. The problem here is that some investors care more about the long-term viability of Bank of America than others. And that's a messy problem with a class-action style settlement.

Even if this dissenting group of investors turns out to have a strong argument here, it's reportedly just 11out of probably dozens involved in the settlement -- and some of those are pretty big, powerful players in the industry. Names like BlackRock, The Federal Reserve Bank of New York, and PIMCO come to mind. This won't be an easy challenge to win.

Read the full story at Deal Journal.

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