Bank of America Settles Hefty $9.3M LawsuitBy: Lacy Langley - March 27, 2014
Bank of American took quite a hit from the Federal Housing Finance Agency in a lawsuit that ended in a $9.33 million dollar lawsuit.
The FHFA, which is the agency that oversees the operations of Fannie Mae and Freddie Mac, sued Bank of America as one of the 18 entities they sued for misrepresenting mortgages that were backed by Fannie and Freddie.
The settlement will take quite a chunk out of the bank’s first quarter 2014 income by $3.7 billion, but will free the bank from other pending FHFA lawsuits that threatened to do even more damage.
Bank of America is only 1 out of the 18 banks that the FHFA sued over soured mortgage securities, beginning in 2011. Many of those banks that were sued have settled, according to AP.
This fiasco happened during the housing bubble that burst and led to the 2008 government bailout of Fannie Mae and Freddie Mac. The government agencies don’t make the loans, but they buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors.
Bank of America says it will split the settlement into a cash payment of $6.3 million and a large securities purchase of $3 million.
According to Forbes, Bank of America said of the settlement, “The FHFA settlement resolves one of the most significant remaining pieces of RMBS (Residential Mortgage Based Securities) securities litigation facing the company. With this settlement, Bank of America has now resolved approximately 88 percent of the unpaid principal balance of all RMBS as to which RMBS securities litigation has been filed or threatened for all Bank of America-related entities.”
Bank of America wasn’t only dishing it out for Fannie and Freddie. They, along with former chief executive Kenneth Lewis, also recently reached a settlement to end investigations into their somewhat shady acquisition of Merrill Lynch & Co in 2008. That one cost them $25 million, with the bank paying $15 million and Lewis paying $10 million.
In that particular case, they are accused of not disclosing Merrill Lynch & Co’s losses and bonuses before the deal was closed. Lewis is now barred from serving as an officer or director of a public company for 3 years.
Image Via Wikimedia Commons