WASHINGTON: Bank of America agreed to pay $9.3bn to settle claims that it sold Fannie Mae and Freddie Mac faulty mortgage bonds, helping the bank to end one of the largest legal headaches it still faced from the financial crisis.
The settlement, announced on Wednesday, includes $6.3bn in cash and the rest in securities that Bank of America will purchase from the two housing finance entities. The second-largest US bank by assets said it had now resolved around 88 percent of its total exposure to securities at issue in the mortgage bond litigation it has faced.
Bank of America’s first-quarter profits could take a substantial hit from the deal. The bank said the settlement was expected to reduce first-quarter income by about 21 cents a share, or three-quarters of what analysts surveyed forecasted the bank to earn before the settlement was announced.
Also, Bank of America and its former chief executive, Kenneth Lewis, settled a lawsuit by New York’s attorney general that alleged it misled investors about mounting losses at Merrill Lynch & Co, which the bank agreed to acquire at the height of the financial crisis. Reuters
