Bank of America pre-emptively avoided a legal battle of massive proportions yesterday when they agreed to pay $8.5 billion to investors who had claimed that there were “material discrepancies from underwriting guidelines” (read: lies about quality) in mortgage bonds they purchased from Countrywide, the mortgage lender that Bank of America bought right before the market totally collapsed in 2008. This was good news: Analysts and investors had expected that Bank of America would have to pay up to $50 billion to make the angry investors go away, so $14 billion—a number that also includes the $5.5 billion that the bank is using to buy back defective mortgages—was a relative pittance.
With all that money out of the way to settle accusations of fraud, Bank of America still must contend with lawsuits and investigations related to its mortgage practices. The feds are currently investigating Bank of America’s foreclosure practices, which allegedly include signing foreclosures without reading them. And in at least once instance, Bank of America tried to foreclose on a house that didn’t have a mortgage. [Wall Street Journal]
Copyright 2011 The National Memo