Bank of America to pay Fannie Mae and Freddie Mac
- 27 March 2014
- From the section Business
Bank of America agreed to pay $9.5bn (£5.7bn) to settle charges it misled US mortgage lenders Fannie Mae and Freddie Mac before the housing crisis in 2008.
The bank will pay $6.3bn in cash and buy back $3.2bn in mortgage securities.
The settlement resolves four lawsuits filed in 2011 by US regulatory agency, the Federal Housing Finance Authority (FHFA).
Those suits were filed against Bank of America as well as Countrywide and Merrill Lynch.
Bank of America bought Countrywide and Merrill Lynch in 2008 and 2009 respectively, during the height of the financial crisis.
The bank said the agreement resolved "one of the most significant remaining pieces" of housing market-related litigation against the firm.
"This settlement... 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," said FHFA director Melvin Watt in a statement.
Banned from business
Separately, Bank of America settled a lawsuit brought by New York's attorney general in 2010.
That suit, which was filed against Bank of America as well as the bank's former chief executive Kenneth Lewis, alleged that Bank of America failed to disclose losses at Merrill Lynch prior to the bank's acquisition of the firm.
In hiding these losses, New York's attorney general alleged that Bank of America misled shareholders about the purchase.
To settle the suit, Bank of America agreed to pay $15m and adopt certain corporate governance changes.
Additionally, Mr Lewis agreed to pay $10m, and said he will accept a three-year ban from working at any public company as part of the settlement.
The firm said that it has now resolved around 88% of the total cost of pending litigation relating to the bank's conduct during the housing crisis.