Bank of America's settlement is by far the largest amount paid by big banks facing mortgage securities probes. Fred Katayama reports.
The bank bearing the biggest legal headache soon to put much of that behind it. Bank of America will pay nearly $17 billion to settle charges it had misled investors over mortgage securities it sold in the run-up to the financial crisis. That's by far the largest penalty slapped against the big banks facing mortgage probes. The bank acquired its mortgage liabilities when it bought Countrywide Financial and Merrill Lynch. The settlement break down: nearly $10 billion in cash. $7 billion to aid struggling homeowners. The total penalty is almost $10 billion more than that of Citigroup and nearly $4 billion more than JPMorgan Chase. Goldman Sachs says it's actually comparable to that of JPMorgan because BofA has more than double the size in mortgage originations and higher loss rates. Analyst Richard Ramsden said, "While a $17 billion settlement is clearly expensive and will result in 2014 being largely a 'lost year' from a capital build and profit-and-loss standpoint for Bank of America, it does put a major legal overhang behind the company." He estimates a $10 billion cash settlement would rob 25 to 35 cents off per share earnings. BofA stock, flat this year, edged higher in early trading.