[UPDATE: Bank of America announced on Thursday that it has agreed to a $16.65 billion settlement with the federal government to resolve allegations that it sold faulty mortgage-backed securities to investors in the run-up to the financial crisis in 2008. Specifically, the bank will pay about $7 billion in relief to homeowners and about $9.65 billion in cash penalties, including a $5.02 billion civil monetary penalty and $4.63 billion in compensatory remediation payments. To read the bank's statement, click here.]
Bank of America will reportedly pay nearly $17 billion to settle allegations brought by the U.S. Department of Justice (DOJ) that it packaged poorly underwritten mortgages into securities and sold them to investors in the run-up to the financial crisis.
As per a Wall Street Journal report, citing un-named sources close to the negotiations, a final agreement could come as early as Thursday. If finalized, the roughly $17 billion settlement would be the largest between the U.S. government and a single company.
What's more, it would eclipse the record-breaking $13 billion settlement JPMorgan Chase reached with federal and state authorities over similar allegations last November.
Bank of America will likely pay the $17 billion in the form of civil penalties and consumer relief, the WSJ reports.
Brian Moynihan, CEO of Bank of America, has said in recent interviews that once the bank gets this large settlement finalized, it will be among the last that the bank faces in connection with the faulty mortgages sold to investors – most of which were originated by Countrywide Financial Corp., which Bank of America purchased in the wake of the 2008 financial crisis.
Over the past four years, the bank has spent more than $60 billion – including a $9 billion settlement with the Federal Housing Finance Agency – to resolve litigation related to the sale of mortgage-backed securities and other regulatory matters, the WSJ reports.
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 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 a Bloomberg News report.
In July, it was announced that Citigroup would pay about $7 billion to resolve similar allegations brought by federal and state officials.
Specifically, Citigroup 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.