Multinational insurer American International Group Inc. (AIG) has finally reached a $650 million global resolution of its residential mortgage-related disputes with Bank of America.
The resolution includes its claims pending in New York and California federal courts related to the creation, offering and sale of residential mortgage-backed securities (RMBS) from which AIG and its subsidiaries suffered losses either directly on their own account or in connection with their participation in AIG's securities lending program.
The resolution also covers AIG's objections to the $8.5 billion settlement of Countrywide's mortgage repurchase obligations to various investors, as well as disputes concerning the issuance of mortgage guaranty insurance by AIG's United Guaranty subsidiaries to Bank of America and Countrywide.
Under the terms of the settlement, AIG will receive $650 million in cash, plus its pro rata share of whatever amount is ultimately paid out to investors in connection with the Countrywide repurchase settlement.
In addition, the parties have agreed, subject to the approval of Fannie Mae, Freddie Mac and certain other mortgage holders, to resolve the outstanding mortgage guaranty claims disputes in accordance with agreed-to claims processes and payment formulae.
"We are very pleased to have this matter resolved," says Robert H. Benmosche, AIG's president and CEO. "Today's settlement is a just resolution that's in the best interest of our various stakeholders."
In its second-quarter report, Bank of America says it has now resolved approximately 95% of the unpaid principal balance of all RMBS as to which RMBS securities litigation has been filed or threatened for all Bank of America-related entities.
The bank also reports a net income of $2.3 billion for the quarter, or $0.19 per diluted share, on revenue of $22 billion. These results follow litigation expenses of $4 billion (pre taxes), or $0.22 per share (after taxes), stemming from other recent mortgage-related settlements.
