Thu August 21, 2014
Bank Of America Settles Mortgage Case For $16.65 Billion
DAVID GREENE, HOST:
Bank of America agreed to pay more than $16 billion to settle charges that it defrauded investors about the quality of mortgage assets it's sold in the run-up to the financial crisis. This settlement is expected to resolve most of the outstanding state and federal claims against the bank. NPR's Jim Zarroli reports.
JIM ZARROLI, BYLINE: The settlement was worked out during months of talks between Bank of America and state and federal regulators. The bank agreed to pay a civil penalty of more than $9.5 billion. And it will also pay another $7 billion for various kinds of mortgage relief for consumers. Together, that will dwarf's the bank's 2013 profit of almost $13 billion. The settlement was announced this morning by U.S. Attorney General Eric Holder.
U.S. ATTORNEY GENERAL ERIC HOLDER: This constitutes the largest civil settlement with a single entity in history, addressing conduct uncovered in more than a dozen cases and investigations.
ZARROLI: Much of the case against Bank of America actually involves conduct by Merrill Lynch and Countrywide Financial. Since Bank of America later purchased those institutions, it's legally liable for their conduct. Holder said these institutions knowingly sold securities that were backed by faulty mortgages - mortgages that were insufficiently collateralized or based on faulty appraisals.
HOLDER: Yet these financial institutions knowingly and fraudulently marked and sold these loans as sound and reliable investments.
ZARROLI: Holder said part of the money paid by the bank will provide mortgage relief for individuals still struggling with the effects of the subprime mortgage crisis. It will also go to communities with lots of homes that have been foreclosed upon and abandoned. The settlement announced today follows smaller deals between the government and two other big banks - Citigroup and JPMorgan Chase. In a statement, Bank of America said the settlement was in the best interest of its shareholders and would allow it to continue to focus on the future. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.