Bank of America agrees to massive legal settlement
The deal seeks to clean up the mess from Countrywide Financial, which the bank bought in 2008. Will victims of Countrywide's predatory lending practices see justice?
Under terms of the deal, which seeks to clean up the mess created by Countrywide, B of A will make a cash payment of $3.6 billion to Fannie Mae and repurchase $6.75 billion in residential mortgages sold between 2000 and 2008 that are worth less than their original price. The company expects the settlement to shave $2.5 billion from fourth-quarter earnings. Bank of America also plans to sell the servicing rights to mortgages with a cumulative value of about $306 billion.
Countrywide Financial, which has generated more than $30 billion in losses, was the poster child for the reckless lending practices that helped create one of the biggest real estate bubbles in recent memory. The company's longtime CEO, Angelo Mozillo, tried to curry favor on Capitol Hill through a "Friends of Angelo" loan program that offered members of Congress mortgages under more advantageous terms than they could have gotten otherwise.
A 2008 probe by the Center for Responsible Lending detailed a litany of abuses by Countrywide, including steering customers with good credit scores into high-cost subprime mortgages. The company's practices were especially tough on minorities and the elderly, and sadly were not isolated.
Ten banks, including B of A, have reached an $8.5 billion settlement with Office of the Comptroller of the Currency and Federal Reserve, according to media reports. As New York Times columnist Gretchen Morgenson noted on Sunday, the settlement, which was rumored to be in the works, "means more of the same: no accountability for financial institutions and little help for borrowers."
As for Mozillo, he is enjoying his retirement. He agreed to pay $67.5 million in 2010 to settle fraud charges brought by the SEC. Between 2000 and 2008, Mozillo earned $526.8 million in compensation, according to the Wall Street Journal. He isn't facing criminal charges. Last May, the former CEO sold his 6,238 square foot home in California for $2.9 million, according to the Los Angeles Times.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter@jdberr.
More on Money Now
- Could a $1 trillion coin fix the national debt?
- Dollar stores feeling the pinch
- NBC sends Donald Trump a warning
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Both lawmakers voted against aid for Superstorm Sandy victims before accepting funds to help their own tornado-ravaged state.
- Target blames weather for soggy results
- Chick-fil-A thrown back into gay marriage debate
- Oklahoma tornado losses could top $2 billion
- Apple's stock is slipping, but its brand value isn't
- Meet the class of 2013, the most indebted yet
- Is Abercrombie just for the 'cool kids'?
- McDonald's unveils its highest-calorie item ever
- How Samsung could save Best Buy
- Is the new Xbox Steve Jobs' dream device?
[BRIEFING.COM] S&P futures vs fair value: -13.10. Nasdaq futures vs fair value: -15.30. Equity futures continue to trade lower with the S&P 500 futures down 1.0%.
The latest weekly initial jobless claims count totaled 340,000, which was lower than the 348,000 that had been expected by the Briefing.com consensus. Today's tally was below the revised prior week count of 363,000. As for continuing claims, they fell to 2.912 million from 3.024 million. Nasdaq at... NYSE ... More
More Market News
The market's cheap money addiction is laid bare. No one knows how it will end.