Wednesday, June 29, 2011

BofA Nears $8.5 Billion Record-Setting Payout

Daily Real Estate News, June 29, 2011
Bank of America Corp. is near a settlement to pay $8.5 billion to mortgage investors who claim the bank sold them fraudulent mortgage securities, The Wall Street Journal reports.

The mortgage securities in question, originally valued at $105 billion, contained home mortgages that faltered after the financial and housing crisis. Investors claim they were misled by the mortgage securities packages, arguing the securities were highly rated despite being full of loans that had borrowers with questionable credit.

The $8.5 billion payout would be the largest settlement by a financial services firm.

The settlement could prompt other mutual-fund managers and investors to seek similar settlements from other banks for loans they purchased before the housing collapse that didn’t meet expectations or were not properly managed, The Wall Street Journal reports. Bank of America, Wells Fargo & Co and J.P. Morgan Chase & Co. collect loan payments on about half of all outstanding mortgages in the country.

Investors accused Countrywide of misleading them with the securities. Bank of America purchased Countrywide in 2008 for $4 billion.

Source: “BofA Nears Huge Settlement--$8.5 Billion Payment to Investors in Mortgage Securities Would Be Biggest Yet,” The Wall Street Journal (June 29, 2011)

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