News Column

Bank of America agrees to pay nearly $17B

August 20, 2014

By Kevin McCoy, and Kevin Johnson, USA TODAY

Bank of America has agreed to pay nearly $17 billion to settle federal and state allegations it sold risky, mortgage-backed securities to investors before the national financial crisis, a person familiar with the matter said Wednesday.

The settlement, the largest in history between the federal government and a single company, is expected to be unveiled as soon as today, said the person, who spoke on condition of anonymity in advance of the official announcement.

The tentative deal is expected to include billions to the Department of Justice and several states, with billions more going to reduce mortgage payments for struggling homeowners and other consumer relief.

Shares of the nation's second-largest bank, (BAC), closed up fractionally at $15.52 Wednesday, and were up an additional 5 cents in after-market trading.

The deal was hammered out during months of talks between lawyers for Bank of America and Department of Justice prosecutors -- as well as direct talks between Bank of America CEO Brian Moynihan and Attorney General Eric Holder.

The settlement marks the latest in a series of Department of Justice legal actions focused on financial institutions whose marketing and sale of risky mortgage-backed securities contributed to a real estate market collapse amid the 2008 financial crisis.

The largest previous settlement involved JPMorgan Chase, which in November agreed to pay $13 billion and admit it sold billions in toxic mortgage investments. Similarly, Citigroup in July agreed to a $7 billion deal over similar allegations.

For Bank of America, the record-breaking settlement significantly boosts the more than $60 billion that the Charlotte, N.C.-headquartered bank has already spent to resolve legal issues stemming from the financial crisis. No other U.S. bank has spent more.

Much of the activity covered by the settlement occurred in Countrywide Financial, the mortgage company the bank bought in 2008, and Merrill Lynch, the brokerage the bank also acquired during the financial crisis.

Despite the size of the settlement, some consumer groups have criticized the lack of detailed data on investor losses linked to the mortgage-selling scheme, as well as an absence of charges against specific bank officials.

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Source: USA Today

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