Bank of America paying $45 million to state to settle mortgage case

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bank-of-america-logoBank of America has agreed to pay $45 million to Delaware to settle allegations that it misled investors about the riskiness of mortgage-backed securities, Delaware Attorney General Beau Biden announced.

Bank of America was a major player in the financial crisis, with the purchase of troubled lender Countrywide as part of an expansion effort.

Bank of America, which employs an estimated 7,000 in the state had been a holdout in efforts to secure a settlement. However, other court decisions had gone against the company and it finally struck a deal.

Biden’s office announced that it has secured  at least $180 million in mortgage-related settlements with other financial institutions.

Delaware’s settlement with Bank of America is part of a $16.7 billion settlement announced Thursday between the bank, the United States Department of Justice, Delaware and five other states – California, Illinois, Kentucky, Maryland, and New York.

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Biden said the effort to secure settlements will continue.

Delaware’s settlement works as follows:

· Bank of America will pay $31.6 million to the state. As with previous settlements, the funds must be used to deal with  the harm Delaware’s communities suffered as a result of the housing crisis;

· Bank of America will pay $13.4 million to reimburse government entities for losses suffered on Bank of America, Merrill Lynch and Countrywide investments that were wrongly marketed as being low-risk; and

· Bank of America will make direct financial benefits, such as mortgage modifications and forgiveness of second mortgages, available to homeowners. Under the terms of the settlement, Bank of America must provide at least $150 million in benefits to consumers in Delaware, Maryland and Kentucky (the three smallest states participating in the settlement). Homeowners with mortgages serviced by Bank of America may be eligible for these benefits. To determine eligibility, homeowners should contact Bank of America at 877-488-7814 or Biden’s Office of Foreclosure Prevention at 1-800-220-5424.

This settlement with Bank of America, along with the two recent settlements with JPMorgan Chase and Citigroup, resolves allegation centering on the bank’s bundling and sale of mortgages to investors. These investments – bought by pension funds, mutual funds and other investors – were represented as low risk but were in fact much riskier than advertised. The resulting losses were disastrous for the economy.

The settlements come after large credit card banks in the state, including Bank of America,  agreed to add or maintain employment in Delaware.

Chase, in particular, has been active in expanding operations, the most recent move being the purchase of the South Campus of AstraZeneca. Earlier, Chase settled mortgage claims.

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