Bank of America Corp. will pay $950 million to settle claims brought by mortgage insurer Financial Guaranty Insurance Co. (FGIC) and several groups of investors that the bank's Countrywide unit pooled faulty mortgages into securities that were backed by FGIC, resulting in significant losses for the insurer when the housing market went bust in 2008.
The settlement also resolves claims brought by Bank of New York Mellon Corp., the trustee for the securities, Bloomberg News reports.
The settlements relinquish Bank of America from having to repurchase the faulty home loans now or in the future.
Bank of America has set aside more than $50 billion to resolve disputes with regulators and investors over foreclosures and shoddy mortgages.
Bank of America will pay $584 million to FGIC and $365 million to investors in nine bond deals tied to home-equity loans made by Countrywide, which Bank of America bought in 2008. Among these investors is Fir Tree Partners, a $12 billion hedge fund.
‘This unique global settlement provides both significant direct cash payments to the RMBS trusts and increased long-term value to all FGIC policyholders,’ says David Proman, director of structured products at Fir Tree Partners, in a statement.
Bank of America has already paid about $900 million to resolve the claims, according to the report. Both Fir Tree and government-sponsored enterprise Freddie Mac reportedly played roles in structuring the settlements.
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