August 24, 2014

BofA settles with Justice Dept. for $16B

Aug. 22, 2014 – Bank of America reached a $16.65 billion settlement with the Justice Department – the largest settlement of the kind to date – in the wake of the investigation into accusations that the bank sold flawed mortgage securities.

The Wall Street Journal said it was the largest settlement to ever be reached between the government and a single company. The settlement will be divided so that $9.65 billion in cash goes to Justice, six states, and government agencies including the Securities and Exchange Commission, and $7 billion goes to aid consumers who are underwater on their homes or struggling to modify their mortgages.

The Journal said many of the mortgage securities were linked to Countrywide Financial Corp. and Merrill Lynch & Co. before Bank of America purchased them in 2008, but that the bank's own mortgage securities had problems as well.

Earlier this year, a federal district court judge in Manhattan ordered Bank of America to pay $1.3 billion over selling defective loans – a decision the New York Times called "unexpected" and said may have affected the bank's decision to "suddenly cave in" to the Justice Department's demand that it raise its previous settlement offer in these negotiations.

In April 2013, Bank of America entered into a $165 million settlement with NCUA in response to purchases of residential mortgage-backed securities by failed corporate credit unions.