A federal judge ordered State Street Corp (STT.N) to pay $89.75 million to settle a lawsuit over mortgage losses, rejecting the bank's argument that the accord may prove unfair depending on how a related regulatory probe is resolved.

U.S. District Judge Richard Holwell in Manhattan granted preliminary approval of the class-action settlement with a group of employee benefit plans late Wednesday.

The accord resolves allegations that the plans lost more than $150 million in the third quarter of 2007 because of State Street's investments in risky securities, including mortgages.

Holwell said State Street signed a binding term sheet for the settlement on June 26, a day after the U.S. Securities and Exchange Commission issued a Wells notice indicating possible civil charges related to mortgage investments.

According to the judge, State Street said it has been in talks with the SEC to resolve that matter since late July, making it impossible to determine whether the class-action settlement is fair, reasonable and adequate.

Holwell set a Feb. 17, 2010, hearing to consider final approval of the settlement.

State Street and the SEC did not immediately return calls seeking comment. Shares of State Street closed Wednesday at $42.58 on the New York Stock Exchange.

The case is In re State Street Bank and Trust Co ERISA Litigation, U.S. District Court, Southern District of New York, No. 07-8488.