Bank of America has reached a tentative $17 billion settlement deal with the U.S. Department of Justice to resolve allegations that it fraudulently marketed mortgage-backed securities.
The terms of the mortgage settlement were reached last week during a phone conversation between Bank of America CEO Brian Moynihan and Attorney General Eric Holder, reports USA Today. If approved, the settlement would be the largest ever between the government and a financial institution in the ongoing string of disputes involving mortgage servicing and mortgage-backed securities.
What are the terms of the settlement and how does it compare to past settlements between the government and financial institutions?
Rumored Settlement Terms
The tentative deal is rumored to include about $9 billion in cash, with the rest going toward consumer relief programs, reports The Associated Press.
Bank of America had previously vowed to fight the Department of Justice, arguing that it should not be liable for mortgages issued by Merrill Lynch and Countrywide -- companies BofA acquired in 2008. However, in a separate case last week, a federal judge in New York found that Bank of America was liable for actions taken for Countrywide before the companies merged, and hit BofA with more than $1.2 billion in fines.
If approved, the $17 billion settlement would eclipse last year's $13 billion settlement between JP Morgan and the Justice Department stemming from similar mortgage-backed securities fraud allegations.
Both JP Morgan and Bank of America were also part of a 2012 settlement in which the five largest U.S. mortgage-servicing institutions -- BofA, JP Morgan, Wells Fargo, Citigroup, and Ally -- agreed to pay $25 billion and make changes to the way the institutions handled foreclosures and serviced mortgages.
Earlier this summer, the Justice Department settled its case with SunTrust Banks over unlawful mortgage practices. In that settlement, the bank agreed to pay nearly $1 billion, including $500 million to help borrowers at risk of foreclosure or underwater on their mortgages.
- Bank of America Offers U.S. Biggest Settlement in History Over Toxic Mortgage Loans (The New York Times)
- Mortgage Settlement: Will You See Any of It? (FindLaw's Law and Daily Life)
- $8.5B Foreclosure Settlement: How to Cash In (FindLaw's Law and Daily Life)
- New Mortgage-Lending Rules: 3 Things to Know (FindLaw's Law and Daily Life)