America’s second largest lender has reached a $16.65 billion settlement with US federal authorities over selling bad mortgages, the Justice Department said Thursday.
The bank will pay out $10 billion in cash and $7 billion for consumer relief – such as modified home loans and refinanced mortgages, AP reports, citing officials close to the negotiations.
The fine is the largest single compensation settlement, beating out JPMorgan Chase & Co’s $13 billion penalty paid in November 2013. Citigroup, another major US bank, had to pay $7 billion in July.
In March, the bank was ordered to pay $9.5 billion to the Federal Housing Finance Agency to resolve similar associations. Since the financial crisis, the bank has been ordered to pay over $60 billion in fines, claims, and buying out mortgage bonds.
The bank admitted it misled investors about the quality of mortgage loan sale prior to the housing crash, when banks lent out too much money to homeowners who eventually could not pay off their loans.
This eventually resulted in the collapse of the housing bubble and the beginning of the recession in late 2007. The banks defrauded investors about the condition of the loans, which led to billions in losses while millions of Americans lost their homes to foreclosure.
Three quarters of the loans in question came from Countrywide Financial, which Bank of America acquired in 2009, along with Merrill Lynch. In total, between 2004 and 2008, the groups sold more than $965 billion in bad loans.