Last week, Bank of America announced that it will shell out $8.5 billion in the bank’s largest single settlement in the current financial crisis. The money will go to 22 institutional investors that lost money on mortgage-backed securities. Many of the mortgage issues stem from BOA’s purchase of Countrywide in 2008. BOA says the settlement will lead to a 2Q loss for them of roughly $8.6B – $9.1B, and is subject to court approval.
BOA CEO Brian Moynihan is looking at the settlement as a chance to minimize the impact of economic uncertainty and put the whole issue behind them. In his mind, it made more sense to settle than to continue the fight.
This settlement could spur other banks such as JP Morgan Chase and Wells Fargo to settle mortgage claims in the near future.
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