BofA to get credit for record $16.7-bn settlement of US mortgage probes
22 August 2014
Bank of America Corp could get credit towards its record $16.7 billion settlement of US mortgage probes without much effort.
As part of the agreement, BofA pledged $7 billion in consumer relief in the deal.
The justice department's website said some of that might be satisfied as borrowers got mortgage help from firms that bought their loans or servicing rights from the bank. That could also apply to assets the bank already sold.
Earlier, settlements with big banks were criticised by investors and lawmakers after the companies got credit for borrower relief that might have occurred anyway or left other firms bearing the cost.
Bank of America's shares surged 4.1 per cent - the highest in 15 months - after the announcement of the settlement by the government, ending what, according to BofA was its last big legal bout from the housing bust.
Bloomberg quoted Kevin Stein, associate director of the California Reinvestment Coalition as saying, it was not just that the bank getting credit for what it would do otherwise, but for something somebody else was doing. The coalition advocates financial services in low-income communities.
According to the bank, the "claims relate primarily to conduct that occurred at Countrywide and Merrill Lynch" before its acquisition of the assets of the financial crisis in 2008, The Telegraph reported.
The settlement brings closure to "certain actual and potential" civil claims by the US Department of Justice, the Securities and Exchange Commission (SEC) and state attorneys general from California, Delaware, Illinois, Kentucky, Maryland and New York, as well also all claims against Bank of America entities brought by the Federal Deposit Insurance Corporation (FDIC).
However, it excludes potential criminal claims or potential claims against individuals and certain "whistleblower actions".
According to Eric Holder, the US attorney general, the bank and its Countrywide and Merrill Lynch subsidiaries had "engaged in pervasive schemes to defraud financial institutions and other investors" by misrepresenting the soundness of mortgage-backed securities. He added the penalties went "far beyond the cost of doing business."