Negotiations over a multibillion-dollar settlement deal between Bank of America and the Justice Department concerning the bank's role in the mortgage crisis reportedly stalled on Tuesday when attorneys for the bank tried to bring new settlement terms to the table, despite the fact that federal prosecutors had a near-final proposal ready to go.
The New York Times reports that Bank of America's latest offer of $12 billion to settle claims that it sold faulty mortgages to investors during the run-up to the financial crisis – resulting in billions in losses – has been rebuffed by federal prosecutors who are seeking a cash penalty closer to $17 billion.
According to the report, the bank's resistance to the proposed settlement stems, in part, from the fact that most of the faulty mortgages in question were originated by Merrill Lynch prior to its acquisition by Bank of America in late 2008. Bank officials have said they felt pressured by the Federal Reserve and Treasury Department to go through with the acquisition, though the bank made the decision to pursue the purchase.
In addition, Bank of America is contesting how the settlement deal is structured. According to the report, the bank wants most of the settlement to come in the form of assistance to borrowers, as opposed to a cash penalty.
If Bank of America is ultimately ordered to pay the full $17 billion, it would be the largest settlement ever reached between a bank and the U.S. government – eclipsing the record $13 billion settlement that JP Morgan Chase agreed to last fall to resolve similar claims.
What's more, the latest settlement would come on top of a $6.3 billion deal Bank of America reached earlier this year with the Federal Housing Finance Agency concerning the sale of faulty mortgages to Fannie Mae and Freddie Mac.
For more, check out the New York Times report.