Bank of America (BAC) will pay $9.3 billion to settle securities claims that it sold faulty mortgage bonds to Freddie Mac (FMCC) and Fannie Mae (FNMA). The deal, reached with the Federal Housing Finance Agency, includes $3.2 billion in securities that the bank will buy from the housing finance entities and a cash payment of $6.3 billion.
The mortgage bond settlement resolves securities lawsuits against the bank, Countrywide, and Merrill Lynch (MER). FHFA, which regulates both Freddie Mac and Fannie Mae, accused Bank of America of misrepresenting the quality of the loans behind residential mortgage-backed securities that the mortgage financing companies purchased between 2005 and 2007.
This is the 10th of 18 securities lawsuits reached by the FHFA over litigation involving around $200 billion in mortgage-backed securities. To date, it has gotten back over $10 billion over such claims.
During the housing boom, Freddie and Fannie bought privately issued securities in the form of investments and became two of the biggest bond investors. The US Treasury was forced to rescue the two entities in 2008 as their mortgage losses grew.
Also, Bank of America and its ex-CEO Kenneth Lewis have settled for $25 million a NY mortgage lawsuit accusing them of deceiving investors about the firm’s acquisition of Merrill Lynch. The state’s Attorney General Eric Schneiderman accused Lewis of hiding Merrill’s growing losses from Bank of America shareholders before the merger vote in 2008 and getting the US government to give over another $20 billion in bailout money by making false claims that he would step out of the merger without the funds. Another defendant, ex-CFO Joe Price, has not settled yet.
NY officials had sued Bank of America, Lewis, and Price under its Martin Act. The US Securities and Exchange Commission also sued the bank over Merrill losses and bonus disclosures. That securities lawsuit was settled for $150 million. Another case, a shareholder class action lawsuit, was settled for $2.43 billion.
Contact our mortgage-backed securities lawyers if you suspect you may have been the victim of securities fraud.
Bank of America to Pay $9.5 Billion to Resolve FHFA Claims, The Wall Street Journal, March 26, 2014
Bank of America to pay $9.3 billion to settle mortgage bond claims, Reuters, March 26, 2014
More Blog Posts:
$500M MBS Settlement Reached Between Countrywide and Investors, Stockbroker Fraud Blog, May 10, 2013
Bank of America and Countrywide Financial Sued by Allstate over $700M in Bad Mortgage-Backed Securities, Stockbroker Fraud Blog, December 29, 2010
Bank of America’s $8.5B Mortgage Bond Settlement Gets Court Approval, Institutional Investor Securities Blog, January 31, 2014