BofA Inks Record: Offers biggest settlement in American history
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Bank of America ATM Slots

Bank of America ATM Slots

Bank of America Corp. and the U.S. Justice Department have finally put an end to probes stemming from sales of mortgage-backed bonds that fortified financial crisis, according to a person acquainted with the matter. The landmark deal is alleged to have closed with the bank agreed to pay $16 billion to $17 billion to settle allegations of mortgage-related disorderly conducts.

Under the proposed terms of the deal, the bank would pay roughly $9 billion in cash and the remaining in consumer relief court to settle federal and state claims. Negotiation for relief and statement of facts is still in process and may take up to a month to reach finalization, according to a source familiar with the matter. Additional money would be driven for consumer relief efforts, for example, reducing mortgage balance for struggling homeowners.

The layout of the arrangement between the two bodies were reached last week, after a telephone conversation between Attorney General Eric Holder and Bank of America Chief Executive Officer Brian T. Moynihan. Amid the July 30 call, Holder said the government is prepared to file a claim in New Jersey if the bank did not offer a sum closer to the division’s demand of about $17 billion.

Bank of America revealed yesterday that it is raising its quarterly dividend to 5 cents per share, at the same time dropping its plan to purchase back stock, in the wake of gaining Federal Reserve support of its proposal for managing capital. The dividend increase seen after seven years, had been deferred not long ago while the company fixed errors in its initial arrangement submitted to the government.

Bank of America Chief Executive Officer Brian T. Moynihan

Bank of America Chief Executive Officer Brian T. Moynihan

Bank officials met with Associate Attorney General Tony West on Tuesday at the Justice Department to work on the settlement. The Wall Street Journal reported the proposal first on the same day.

The agreement, once finalized would chain Bank of America’s status since the firm punished hardest for faulty mortgage practices. It would overshadow Citigroup Inc’s $7 billion settlement In July and JPMorgan Chase & Co’s $13 billion deal in November. During JPMorgan’s case, the justice department phrased it as the biggest settlement with a single entity in American history.

The supposed Bank of America settlement additionally goes ahead of top of its $9.5 billion arrangement in March to settle Federal Housing Finance Agency claims. This time, it fixates on broken credits that Bank of America bequeathed from Countrywide Financial Corp. and Merrill Lynch & Co., at the pinnacle of the 2008 financial crisis.

Firms acquired by Bank of American and under its own operations issued roughly $965 billion in mortgage backed securities between 2004 and 2008. Almost three-fourths of those came from Countrywide. Around $245 billion in securities have defaulted or become delinquent, although Bank of America is only accounted for 4 percent of those.

Arrangements between the Federal government and Bank of America began in March and suspended after three months when the firm recoiled at the $17 billion demand. The bank is said to have proposed about $13 billion, which included at least $5 billion in consumer relief. Prosecutors demanded that Bank of America pay a bigger amount of the penalty in cash instead of adopting remedies, for example, mortgage writedowns and consumer relief.

Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, and Brian Fallon, a Justice Department representative, declined to comment on the settlement.

Author
Carrie Ann is Editor-in-Chief at Industry Leaders Magazine, based in Las Vegas. Carrie covers technology, trends, marketing, brands, productivity, and leadership. When she isn’t writing she prefers reading. She loves reading books and articles on business, economics, corporate law, luxury products, artificial intelligence, and latest technology. She’s keen on political discussions and shares an undying passion for gadgets. Follow Carrie Ann on Twitter, Facebook & Google.

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