Bank Of America In Record Settlement With US
Bank of America is nearing a record settlement to resolve an investigation into its role in the sale of mortgage-backed securities in the run-up to the 2008 financial crisis.
The settlement with the Justice Department would cost the bank $16bn to $17bn (£9.5bn to £10.1bn).
It would be the largest settlement arising from the economic meltdown in which millions of Americans lost their homes to foreclosure, and the largest single federal settlement in the history of corporate America.
The two sides reached an agreement in principle following a conversation last week between Attorney General Eric Holder and Bank of America CEO Brian Moynihan, the AP news agency said, citing a person familiar with the matter.
Details of the deals were still being worked out.
The Wall Street Journal, which first reported the deal, said the bank would pay roughly $9bn†(£5.3bn) in cash, while the remaining sum would go in assistance to struggling homeowners.
The Justice Department last year reached a $13bn†(£7.7bn) settlement with JP Morgan to resolve a civil fraud claim that the bank misled mortgage bond investors.
In July it announced a $7bn†(£4.1bn) settlement with Citigroup over similar charges.
Each of these deals is designed to offer some financial relief to homeowners, whose mortgages were bundled into securities by the banks in question and then sold to investors.
The securities contained residential mortgages from borrowers who were unlikely to be able to repay their loans, yet were publicly promoted as relatively safe investments until the housing market collapsed.
The poor quality of the loans led to huge losses for investors and a slew of foreclosures, kicking off the crisis.