Bank of America to pay $8.5 billion mortgage settlement

The Associated Press reported that Bank of America and its Countrywide component will pay $8.5 billion to investors who purchased poor-quality mortgage-backed securities that failed in 2008 when the housing market collapsed.

According to the news source, the settlement was reached after 22 investors held a meeting where they demanded that the Countrywide bank repurchase the mortgages that were sold to them in the form of bonds. Bank of America purchased Countrywide in 2008 for $4 billion, and denies claims from investors that the bank serviced bad loans while running up service fees.

The settlement could prove to be good for Bank of America according to CEO Brian Moynihan.

"There is another important step we are taking in the interest of our shareholders to maximize the impact of future economic uncertainty," Moynihan said.

The news source reported that the settlement will put Bank of America's second quarter loss between $8.6 billion and $9.1 billion.

The New York Times reported that Paul Miller of FBR Capital Markets projected that Bank of America will have $25 billion in total losses from the failed mortgages. Miller also told the news source that JPMorgan Chase's losses could reach $11.2 billion, Wells Fargo could lose up to $5.2 billion and Citigroup could see losses of $3.3 billion.  

More News