BALTIMORE (WJZ) — Bank of America reaches a record breaking settlement with U.S. regulators for misleading investors into buying toxic mortgage-backed securities.
It’s a $17 billion deal, and Maryland is expected to see some of that money.
Derek Valcourt explains what’s coming to Maryland and what the settlement means.
This was no slap on the wrist. It was essentially a financial punch to the gut for Bank of America, who now has to payout the biggest settlement of any one company in U.S. history.
Predatory lending and practices like robo-signing of foreclosure notices may have led to the housing collapse that fueled the Great Recession. But U.S. regulators say, just as nefarious, banks like Bank of America and the two companies it has since acquired, Merrill Lynch and Countrywide, knowingly took those troubled loans, bundled them together and sold them to investors.
That’s why Thursday Attorney General Eric Holder announced a $17 billion settlement with the nation’s second largest bank.
“This is appropriate considering the size and scope of the wrongdoing at issue,” Holder said.
And for Maryland, it means money. Some $75 million will go to compensate state and local government pension funds that lost value when they bought those faulty mortgage backed securities.
“Bank of America knew they were going to plummet, but the pension funds certainly did not have that knowledge,” Maryland Attorney General Doug Gansler said.
Gansler helped lead the charge against the nation’s major banks for their lending practices. Now Maryland, Delaware and Kentucky will share $150 million of the settlement to help still-struggling homeowners.
“We deal with mortgage foreclosures and the evictions on a daily basis,” said Shawn Boehringer, Maryland Legal Aid, chief counsel.
Agencies like Maryland Legal Aid say the settlement could go a long way in providing relief.
“This may help a homeowner restructure their loan in such a way that it would make it affordable or perhaps forgive some of their mortgage debt in order to be able to keep their home,” Boehringer said.
For Bank of America, the massive settlement brings an end to their long legal nightmare.
With this latest settlement, Bank of America now has agreed to pay some $65 billion over their actions in this mortgage crisis.
JP Morgan Chase and CitiGroup also recently reached settlements over similar claims of selling risky mortgage-backed securities. Bank of America’s $17 billion settlement was by far the largest.
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