A massive settlement revealed late Wednesday by Bank of America Corp. will resolve all of its liability from multiple lawsuits filed by the Federal Housing Finance Agency over residential mortgage-backed securities.
Charlotte, N.C.-based BofA announced that it has reached a settlement to resolve all of FHFA’s RMBS litigation against it and against its subsidiaries. The agreement also covers other legacy contract claims.
FHFA filed 18 lawsuits in 2011 against underwriters and issuers of $57.5 billion in private-label MBS that Fannie Mae and Freddie Mac bought.
Named as defendants in four of the lawsuits were BofA, Countrywide Financial Corp. and Merrill Lynch entities. They were accused of falsely representing that the underlying loans complied with certain standards.
The deal calls for BofA to make $6.3 billion in cash payments to Fannie and Freddie. In addition, BofA will repurchase $3.2 billion in RMBS at fair market value.
In all, FHFA said the agreement provides for an aggregate payment of approximately $9.33 billion.
“In return, FHFA’s pending lawsuits will be dismissed with prejudice and Bank of America and its affiliates will be released from all securities law and fraud claims, as well as certain other claims related to the private-label RMBS in dispute,” BofA stated.
Freddie said its take of the winnings is $5.1 billion.
FHFA Director Melvin L. Watt called the agreement “a reasonable and prudent settlement of these cases” and said it represents “an important step in helping restore stability to our broader mortgage market and moving to bring back the role of private firms in providing mortgage credit.”
Prior to the BofA settlement, FHFA had already reached more than $10 billion in MBS settlements. With BofA out of the way, FHFA said claims remain in seven lawsuits.
BofA’s first-quarter 2014 pre-tax income will take a $3.7 billion hit as a result of the settlement.
A second settlement for $15 million was announced by BofA with the New York Attorney General Eric T. Schneiderman.
A separate statement from Schneiderman indicated that including agreements with former BofA chief executive officer Kenneth Lewis and former chief financial officer Joe L. Price, the settlement amounts to $25 million.
The agreement resolves a lawsuit filed by the state in 2010 alleging that BofA failed to disclose losses at Merrill Lynch prior to the BofA’s acquisition of formerly independent investment banker.
BofA said it agreed to adopt certain corporate governance changes as part of the settlement with the New York AG.
