Bank of America to shell out $14 billion for mortgage settlement

Bank of America Settles With Mortgage-Securities Investors

Bank of America announced that they have agreed to a settlement with investors who have purchased securities tied to mortgages from Countrywide Financial which the bank acquired in 2008.

Under the deal, Bank of America will pay $14 billion, $8.5 billion of which will go to a group of investors that include the Federal Reserve Bank of New York.

The bank said the mortgage settlement payment will result to a loss of between $8.6 billion to $9.1 billion for the second quarter.

"This is another important step we are taking in the interest of our shareholders to minimize the impact of future economic uncertainty and put legacy issues behind us," Bank of America chief executive officer and president Brian T. Moynihan said in a statement.

Under the settlement deal, Bank of America will also need to hire specialists who will ensure that the bank follows its own loan-servicing rules and improve its payment schemes.

"We will continue to act aggressively, and in the best interest of our shareholders, to clean up the mortgage issues largely stemming from our purchase of Countrywide," Moynihan said.

Under pressure from investors, Bank of America had to make a settlement offer just to eliminate one of the overriding concerns it faced since the housing market crashed. The investors meanwhile avoided a lengthy and costly legal battle.

Big lenders Bank of America, JPMorgan Chase, Wells Fargo and Citigroup were all embroiled in the mess when they bundled home loans and sold them to investors. But Bank of America is the biggest loser of them all, standing to lose some $25 billion from the failed mortgage investments.

Posted by James Fried on Wednesday June 29 2011, 10:44 AM EST. Ref: NYT. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0