Bank of America will pay a record $16.65 Billion to settle state and federal lawsuits stemming from the collapse of the subprime mortgage market, the Department of Justice announced today.
“This historic resolution – the largest such settlement on record – goes far beyond ‘the cost of doing business,’” said Attorney General Holder. “Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to struggling homeowners, borrowers and communities affected by the bank’s conduct. This is appropriate given the size and scope of the wrongdoing at issue.”
This settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force and its Residential Mortgage-Backed Securities (RMBS) Working Group, which has recovered $36.65 billion to date for American consumers and investors.
While $7 billion of the total will be used to relieve borrowers, $5 billion will be paid in cash in a record-setting civil penalty. Nearly two billion dollars will be paid to settle fraud claims and one billion dollars will be used to settle claims made by the FDIC. $135 million will also be paid to settle claims made by the SEC. And various amounts, ranging from $23 million to $300 million, will be paid directly to states.