WASHINGTON (AP) ― Bank of America has reached a record settlement of nearly $17 billion to resolve an investigation into its role in the sale of mortgage-backed securities before the 2008 financial crisis, officials directly familiar with the matter said Wednesday.
One of the officials, who spoke with the Associated Press on condition of anonymity because the announcement isn’t scheduled until Thursday at the earliest, said the bank will pay $9.65 billion in cash and provide consumer relief valued at $7 billion.
The deal is the largest settlement arising from the economic meltdown in which millions of Americans lost their homes to foreclosure. It follows agreements in the last year with Citigroup for $7 billion and with JPMorgan Chase & Co. for $13 billion.
Like the Bank of America deal, those settlements were a mixture of hard cash and “credits” for various forms of consumer aid that the banks promised to provide in coming years.
The Bank of America settlement was negotiated through a joint federal and state working group established by President Barack Obama two years ago with the Justice Department and other federal and state authorities. Individual states are expected to share in the settlement.
Justice Department spokeswoman Ellen Canale declined to comment, as did New York Attorney General Eric Schneiderman, a co-chairman of the group. The bank also declined comment.
The deal requires Bank of America to acknowledge making serious misrepresentations about the quality of its residential mortgage-backed securities issued by itself and by Countrywide Financial and Merrill Lynch. Those institutions were acquired by the bank when they were on the brink of failure in 2008 and they were responsible for the bulk of the questionable loans.
The deals are intended 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.
