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AP source: BofA nears $16-$17B settlement with US

Published on NewsOK Modified: August 6, 2014 at 9:29 pm •  Published: August 6, 2014
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WASHINGTON (AP) — Bank of America is nearing a $16 billion to $17 billion settlement to resolve an investigation into its role in the sale of mortgage-backed securities before the 2008 financial crisis, a person directly familiar with the matter said Wednesday.

The deal with the bank, which must still be finalized, would be the largest Justice Department settlement by far arising from the economic meltdown in which millions of Americans lost their homes to foreclosure. It would follow earlier multibillion-dollar agreements reached in the last year with Citigroup and JPMorgan Chase & Co.

The person, who spoke on condition of anonymity because the deal had not yet been announced, cautioned that some details still needed to be worked out and that it was possible the agreement could fall apart.

But the person said the two sides reached an agreement in principle following a conversation last week between Attorney General Eric Holder and Bank of America CEO Brian Moynihan.

The person said the tentative deal calls for the bank to pay roughly $9 billion in cash and for the remaining sum to go toward consumer relief.

A bank spokesman declined to comment.

The Wall Street Journal first reported details of the settlement discussions on Wednesday.

The deal would be the latest arising from the sale of toxic mortgage securities leading up to the recession. The Justice Department last year reached a $13 billion settlement with JPMorgan and in July announced a $7 billion settlement with Citigroup.

Each of these deals is designed to offer some financial relief to homeowners, whose mortgages were bundled into securities by the banks in question and then sold to investors. The securities contained residential mortgages from borrowers who were unlikely to be able to repay their loans, yet were publicly promoted as relatively safe investments until the housing market collapsed and investors suffered billions of dollars in losses.

The poor quality of the loans led to huge losses for investors and a slew of foreclosures, kicking off the recession that began in late 2007.

Yet the cash totals now being paid by some of America's largest banks are not nearly enough to reverse the damages caused by the bursting of the housing bubble and the ensuing recession.

Millions of Americans lost their homes in foreclosures and found themselves jobless in the worst downturn since the 1930s. Even as the unemployment rate has clawed back to 6.2 percent from a peak of 10 percent, many people are no better off, as average household incomes after inflation are still lower than what they were seven years ago.

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