Arab Today, arab today bank of america agrees 17bn deal over dodgy mortgages
Last Updated : GMT 20:02:16
Arab Today, arab today
Arab Today, arab today

Bank of America agrees $17bn deal over dodgy mortgages

Arab Today, arab today

Arab Today, arab today Bank of America agrees $17bn deal over dodgy mortgages

Bank of America automated teller machine
Washington - AFP

Bank of America agreed Thursday to a record nearly $17 billion deal with US authorities to settle claims it sold risky mortgage securities as safe investments ahead of the 2008 financial crisis.
The bank said it would pay out $9.65 billion in cash and provide $7.0 billion in relief to consumers affected by losses tied to those securities.
The settlement, with the US Department of Justice, the Securities and Exchange Commission, and other authorities including individual states, resolves a number of civil investigations against the bank and subsidiaries Countrywide Financial and Merrill Lynch, which it took over during the crisis.
But it does not resolve potential criminal cases, especially involving Countrywide, once the country's largest home-loan issuer, and Countrywide officials.
“We believe this settlement, which resolves significant remaining mortgage-related exposures, is in the best interests of our shareholders, and allows us to continue to focus on the future," the bank's chief executive Brian Moynihan said in a statement.
The settlement took aim at hundreds of billions of dollars' worth of low-quality home mortgages pooled into securities that were issued and sold to investors by the bank, Merrill Lynch and Countrywide as high-quality investments.
Authorities pointed out how the residential mortgage-backed securities (RMBS) plummeted in value as the housing market bubble burst in 2006-2007, and many of the mortgages in the bonds, often more than half, soured, causing investors huge losses.
Those losses mounted across major banking institutions in the United States and elsewhere and added heavily to the fall in home values across the country, ultimately snowballing into the financial crisis and the country's deepest economic recession since the 1930s.
"The significance of this settlement lies not just in its size; this agreement is notable because it achieves real accountability for the American people and helps to rectify the harm caused by Bank of America's conduct," said Associate Attorney General Tony West.
The settlement included a group of states which said the bank's actions caused huge losses to their economies and their citizens who lost their houses in part due to the cumulative effect of the crash of the RMBS market.
"Today's settlement attests to the fact that fraud pervaded every level of the RMBS industry," said US Attorney Anne Tompkins for the Western District of North Carolina.
"Even reputable institutions like Bank of America caved to the pernicious forces of greed and cut corners, putting profits ahead of their customers.  As we deal with the aftermath of the financial meltdown and rebuild our economy, we will hold accountable firms that contributed to the economic crisis."
The nearly $17 billion punishment was the largest of a series of multibillion-dollar fines levied against US banks for selling extremely weak, poorly documented mortgage bonds to investors as high-quality securities.

 

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Arab Today, arab today bank of america agrees 17bn deal over dodgy mortgages Arab Today, arab today bank of america agrees 17bn deal over dodgy mortgages

 



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