Bank Of America Agrees Record $17bn Settlement
Bank of America has agreed to a record $17bn (£10.2bn) settlement over its sale of mortgage-backed securities in the lead up to the 2008 financial crisis.
The bank will pay $10bn in cash and provide consumer relief valued at $7bn, officials familiar with the deal told the AP news agency.
The settlement is the largest arising from the economic meltdown during which millions of Americans lost their homes to foreclosure.
It also marks the largest settlement in the history of corporate America.
An agreement in principle was reached earlier this month following a conversation between Attorney General Eric Holder and Bank of America CEO Brian Moynihan, the AP reported.
The settlement requires that the bank acknowledge that it made misrepresentations about the quality of its residential mortgage-backed securities, officials said.
It also requires that Bank of America acknowledge similar misrepresentations by Countrywide Financial and Merrill Lynch, which the bank acquired in 2008.
Bank of America and the Department of Justice have declined to comment.
A formal announcement is expected on Thursday.
According to public records, Bank of America, Countrywide and Merrill Lynch issued $965bn (£581bn) in mortgage-backed securities from 2004 to 2008.
The firms promoted the securities as safe investments despite the fact that they contained residential mortgages from borrowers who were unlikely to be able to repay their loans.
The poor quality of the loans led to huge losses for investors and a slew of foreclosures, kicking off the recession that began in late 2007.
The Securities and Exchange Commission last year charged Bank of America and its two subsidiaries with defrauding investors by failing to disclose key risks and misrepresenting facts about the underlying mortgages.