Bank Of America Mortgage Bond Settlement Could Set New Record

Bank of America Corp. is reportedly close to reaching a settlement with the U.S. Department of Justice (DOJ) and state authorities over the sale of faulty mortgage-backed securities sold to investors during the run-up to the 2008 financial crisis.

As per a Bloomberg News report, citing un-named sources close to the negotiations, the settlement could run as high as $17 billion, thus eclipsing the record $13 billion settlement that JPMorgan reached with the government last November over similar allegations.

Under the proposed terms, Bank of America will pay about $9 billion in cash and the rest in consumer relief to settle federal and state claims, according to the report. However, the details are still being hashed out.

Bank of America has been working since March to reduce the terms of the settlement. It had initially proposed a settlement of about $13 billion, including at least $5 billion in consumer relief; however, during a call last week, Attorney General Eric Holder told Bank of America CEO Brian T. Moynihan that the government was ready to file a lawsuit in New Jersey if the bank didn't offer an amount closer to the DOJ's demand of about $17 billion, according to the report.

In July, it was announced that Citigroup would pay about $7 billion to resolve similar allegations brought by federal and state officials.

Specifically, the bank will pay $4 billion in civil penalties to the DOJ, about $300 million to state attorneys general and about $200 million to the Federal Deposit Insurance Corp. In addition, it will pay about $2.5 billion in various forms of consumer relief by the end of 2018.

For more, check out the Bloomberg News report.


Please enter your comment!
Please enter your name here