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BoA Agrees to Pay $315 Million to Settle Mortgage Case

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bank of americaBank of America Corp.’s (NYSE:BAC) Merrill Lynch unit has agreed to settle the case of misleading investors by selling them bad mortgage security offerings.

The announcement was made public on Tuesday by Merrill Lynch, and is one of the largest mortgage settling claims till date. BoA has agreed to pay around $315 million to settle the various claims regarding misleading of investors.

The lawsuit, which was a proposed class action lawsuit is among the biggest settlements of investor claims that have been filed against mortgage backed securities, which were projected to be safe investment options, even though banks realized that these securities were part of a mortgage bubble about to burst. These mortgage securities later proved to toxic, as all the investors lost money. It also led to worsening of the housing conditions and led to the 2008 recession.


This fine is also the biggest step taken by BoA to address the bank’s legal liabilities that have stemmed from its acquisition of Merrill Lynch in the recessionary period of January 2009, followed by the acquisition of Countrywide Financial Corp., about six months later.

It rumored last month that BoA is coming close to a settlement to close the ongoing mortgage securities lawsuits. BoA’s spokespersons have not been available for comment and neither are lawyers. It is uncertain if some other federal agency will object to such a settlement, where BoA without admitting wrongdoing is paying a large fine to settle the claims.

The case revolves around the 2006-2007 sale of mortgage backed securities Merrill Lynch to investors. Merrill Lynch is alleged to have misled over $16.5 billion worth of mortgage backed securities. However, neither BoA nor Merrill Lynch have agreed to wrongdoing.

According to Mississippi’s Public Employees Retirement System, the documents offered along with the mortgage securities was misleading. These documents overstated the returns from these toxic mortgage securities, on which the bank betted against and rose a profit. The documents also overstated the investment grade ratings, which were not deserved by these mortgage securities.

Another similar bet separate case is being handled by a Los Angeles federal judge over mishandling of the mortgage debt. It is also separate from another case against BoA over a $8.5 billion mortgage settlement in over 500 mortgage securitization trusts, which has around $174 billion unpaid principal. The stocks of BoA were up by 0.69 percent on Tuesday afternoon on the New York Stock Exchange.

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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