Photo: Brian Turner

The ongoing saga of the $8.5 billion settlement between Bank of America Corp. (NYSE: BAC) and 22 institutional investors added another chapter the other day, the second win in a row for the beleaguered bank trying to get the terms of a deal struck over two years ago to permanently stick.

After the majority of the settlement was approved on January 31, a request by American International Group (NYSE: AIG) to delay the approved portions of the settlement threatened the deal's completion. Now, the cloud has been lifted: another judge has declined AIG's request, which means the lion's share of the settlement can move forward.

A long time coming
The approval of the deal came after months of hearings in a New York City courtroom, and weeks of deliberation by New York State Supreme Court Judge Barbara Kapnick. Teased out of the settlement were specific issues regarding loan modifications performed on some of the mortgages contained within the 530 trusts packaged by Countrywide, which Kapnick said trustee Bank of New York Mellon (NYSE: BK) neglected to appropriately address during negotiations between the parties.

This was a definite win for Bank of America, but AIG, which had been claiming all along that the settlement was not large enough, balked. When Judge Kapnick, whose promotion had prompted the handing down of the decision on January 31, moved on, AIG pounced on her successor, requesting a review of its grievances – and a delay in the implementation of the approved portions of the settlement.

The majority of the investor groups supported the resolution of the case, and filed court papers encouraging Justice Saliann Scarpulla, Kapnick's successor, to disallow AIG's arguments – which they claimed would "hold the entire settlement hostage" and was an action designed to lend support to a separate, $10 billion securities case AIG filed against Bank of America back in 2011. On February 19, Scarpulla agreed, denying AIG's motion.

Another problem taken off of B of A's plate
The situation is far from over. Bank of America must now negotiate with investors about the loan modification issues, which Kapnick ruled should not have been included in the settlement by BONY without being properly assessed. Lawyers say approximately $31 billion worth of modified mortgages should have been repurchased by Countrywide, according to the terms of the servicing agreements.

Still, much of the work is done, and a big source of uncertainty has been removed from B of A's list of legal worries. Who knows – the resolution to this case may take the wind out of AIG's sails, prompting the giant insurer to settle its pending $10 billion suit against Bank of America, as well.

Big banks not your cup of tea?
Do you hate your bank? If you're like most Americans, chances are good that you answered yes to that question. While that's not great news for consumers, it certainly creates opportunity for savvy investors. That's because there's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. For the name and details on this company, click here to access our new special free report.

Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends American International Group and Bank of America. The Motley Fool owns shares of American International Group and Bank of America and has the following options: long January 2016 $30 calls on American International Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.