NEW YORK (TIP):
Bank of America Corp. has agreed to pay $16.65 billion to end federal and state investigations into the sale of toxic mortgage securities during the subprime housing boom, the largest settlement by a single company in U.S. history, the Justice Department said Thursday, August 21.
The settlement includes $9.65 billion in fines and $7 billion in aid to communities and homeowners hit hard by the housing market crash that triggered the Great Recession. “This historic resolution — the largest such settlement on record — goes far beyond ‘the cost of doing business,'” Atty. Gen. Eric H. Holder Jr. said in describing what he called “pervasive schemes to defraud financial institutions and other investors.”
“Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to struggling homeowners, borrowers and communities affected by the bank’s conduct,” he said. “This is appropriate given the size and scope of the wrongdoing at issue.” Most of the toxic loans that backed the securities came from firms BofA acquired in 2008, including Countrywide Financial Corp. of Calabasas and Wall Street investment bank Merrill Lynch & Co. BofA already had incurred about $60 billion in losses and legal settlements from the purchase of Countrywide, which was one of the nation’s biggest subprime mortgage lenders during the housing boom of the mid 2000s. Associate Atty. Gen. Tony West said employees of BofA or the firms it acquired misled investors about the quality of the mortgages in the securities.
“It’s kind of like going to your neighborhood grocery store to buy milk advertised as fresh, only to discover that store employees knew the milk you were buying had been left out on the loading dock, unrefrigerated, the entire day before, yet they never told you,” West said. The deal settles claims from the Justice Department, the Securities Exchange Commission and other federal agencies, as well as California, New York and four other states.
Bank of America to pay record $16.65 billion to settle mortgage claims
