News / Economy

Bank of America to Pay $16 Billion to Settle Mortgage Cases

A combination of file photos shows U.S. Attorney General Eric Holder (L) in Washington on May 5, 2014 and Bank of America Chief Executive Brian Moynihan in Hong Kong on March 8, 2013 respectively.
A combination of file photos shows U.S. Attorney General Eric Holder (L) in Washington on May 5, 2014 and Bank of America Chief Executive Brian Moynihan in Hong Kong on March 8, 2013 respectively.
VOA News

U.S. news outlets say Bank of America has agreed to pay over $16 billion to settle the federal government's investigation into its sale of mortgage-backed securities, the investment vehicle largely blamed for the 2008 financial crisis.

The reports say a tentative agreement was reached last week during a phone call between Bank of America chairman Brian Moynihan and U.S. Attorney General Eric Holder. Details of the agreement are still being worked out, but sources say Bank of America will pay $9 billion in cash, with the remaining money being used to help struggling homeowners.

Federal prosecutors have been investigating Bank of America over its acquisitions of Countrywide Bank and investment firm Merrill Lynch, which together held about $965 billion in mortgage-backed securities. The securities included so-called subprime home loans taken out by homeowners who were unable to maintain the payments.

The poor quality of the loans led to huge losses for investors who bought mortgage-backed securities, as well as a wave of foreclosures on delinquent homeowners, which led to the worst economic downturn since the Great Depression of the 1930s.

The settlement by Bank of America is the largest reached with the federal government in connection with the toxic securities. The Justice Department has already reached multi-billion dollar settlements with two other major U.S. banks, JPMorgan Chase and Citigroup.

But consumer advocacy groups have criticized the government for failing to bring criminal charges against these financial firms, or their executives, who sold the faulty mortgages to unsuspecting consumers.

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Comments
     
by: goldenpanther from: Rockville, MD
August 07, 2014 7:54 AM
BOA is still getting off through a very light sentence. Criminal charges would be a more effective way to go. The amount of damage done to the equity in people's homes because of the manipulations by the banking industy probably goes 10 times beyond that. And it will take many more years for the housing industry to recover if it ever does. Realtors will tell you that there is a low inventory of homes for sale but the real truth is there is a far less number of buyers that are willing to try the more restrictive rules. These new rules were generated because the banking industry couldn't control itself. Interest rates are lower than when the housing bubble burst; that should tell you something also.

by: Mike Martin from: Lakewood, co
August 07, 2014 7:32 AM
I lost $120k with my Florida house over this mess. Where do I go to get my cut of this 16 billion?

by: Frank Nelson from: Chicago
August 07, 2014 6:37 AM
If the Executives cannot be punished, then there should be a Corporate DEATH SENTENCE, where a Corporation is fined the entire worth of the Company!

by: William from: Memphis
August 07, 2014 6:21 AM
FINES are passed on to customers, eventually. PRISON IS THE ONLY WAY YOU WILL GET REAL CHANGE IN BEHAVIOR !

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