Settlement Expected to Reduce Q3-14 Pretax
Earnings by $5.3 Billion and Negatively Impact EPS by Approximately
$0.43 per Share
Bank of America announced today that it has reached a
comprehensive settlement with the U.S. Department of Justice (DoJ),
certain federal agencies and six states. The settlement includes
releases on the securitization, origination, sale and other
specified conduct relating to residential mortgage-backed
securities (RMBS) and collateralized debt obligations (CDOs), and
an origination release on residential mortgage loans sold to
Government Sponsored Enterprises (GSEs) and private-label (PLS)
RMBS trusts, or guaranteed by the Federal Housing Authority
(FHA).
The claims relate primarily to conduct that occurred at
Countrywide and Merrill Lynch prior to Bank of America's
acquisition of those entities. Bank of America will pay a total of
$9.65 billion in cash and provide approximately $7.0 billion worth
of consumer relief. The cash portion consists of a $5.02 billion
civil monetary penalty and $4.63 billion in compensatory
remediation payments.
“We believe this settlement, which resolves significant
remaining mortgage-related exposures, is in the best interests of
our shareholders, and allows us to continue to focus on the
future,” said Chief Executive Officer Brian Moynihan.
The settlement resolves certain actual and potential civil
claims by the DoJ, the Securities and Exchange Commission (SEC) and
State Attorneys General from California, Delaware, Illinois,
Kentucky, Maryland and New York (State AGs), all of which are
members of the Residential Mortgage Backed Securities Working Group
of the Financial Fraud Enforcement Task Force; the FHA; and the
Government National Mortgage Association (Ginnie Mae), as well as
all pending claims against Bank of America entities brought by the
Federal Deposit Insurance Corporation (FDIC).
Borrower relief will be in the form of mortgage modifications,
including first-lien principal and forbearance forgiveness and
second-lien extinguishments, low- to moderate-income mortgage
originations, and community reinvestment and neighborhood
stabilization efforts, with initiatives focused on communities
experiencing, or at risk of, urban blight. This includes lien
releases, uninhabitable and abandoned property demolition, and
remediation and property donations. Also, Bank of America will
support the expansion of available affordable rental
housing. Bank of America has committed to complete delivery of
the relief by no later than August 31, 2018. The consumer relief
will be subject to oversight by an independent monitor.
The settlement is expected to reduce third-quarter 2014 pretax
earnings by $5.3 billion, or approximately $0.43 per share after
tax. The EPS impact reflects the varying tax treatment of the
components of the settlement.
The settlement resolves matters pertaining to certain pending
civil enforcement investigations, including investigations by the
DoJ and the State AGs relating to RMBS, CDOs and related mortgage
activities, including origination, by Bank of America, Countrywide,
Merrill Lynch and their affiliates. The claims released include
current and potential claims for securitization-related conduct
occurring prior to January 1, 2009 under the Financial Institutions
Reform, Recovery, and Enforcement Act (FIRREA). The origination
release with respect to loans sold to PLS trusts covers all loans
originated by Bank of America and its legacy entities and
securitized prior to January 1, 2009; the origination release with
respect to loans sold to the GSEs covers all loans sold to the GSEs
by Bank of America or Countrywide prior to December 31, 2013. The
FHA release covers loans originated by Bank of America or
Countrywide on or after May 1, 2009, on which claims were submitted
on or before December 31, 2013 to the FHA.
The settlement does not cover potential criminal claims;
potential claims against individuals; and certain purported
whistleblower actions. In addition, it does not cover the O’Donnell
case (High Speed Swim Lane). The company has reviewed the most
recent court ruling in this case, issued on July 30, 2014, and will
file an appeal with the United States Court of Appeals for the
Second Circuit.
Forward-looking Statements
Certain statements in this news release represent the current
expectations, plans or forecasts of Bank of America based on
available information and are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by the fact that they
do not relate strictly to historical or current facts. These
statements often use words like “expects,” “anticipates,”
“believes,” “estimates,” “targets,” “intends,” “plans,” “predict,”
“goal” and other similar expressions or future or conditional verbs
such as “will,” “may,” “might,” “should,” “would” and “could.”
Forward-looking statements speak only as of the date they are made,
and Bank of America undertakes no obligation to update any
forward-looking statement to reflect the impact of circumstances or
events that arise after the date the forward-looking statement was
made.
These statements are not guarantees of future results or
performance and involve certain risks, uncertainties and
assumptions that are difficult to predict and are often beyond Bank
of America's control. Actual outcomes and results may differ
materially from those expressed in, or implied by, any
forward-looking statements. You should not place undue reliance on
any forward-looking statement and should consider all of the
uncertainties and risks discussed under Item 1A. “Risk Factors” of
Bank of America's Annual Report on Form 10-K for the year ended
December 31, 2013 and in any of Bank of America's other subsequent
Securities and Exchange Commission filings.
Bank of America
Bank of America is one of the world's leading financial
institutions, serving individual consumers, small businesses,
middle-market businesses and large corporations with a full range
of banking, investing, asset management and other financial and
risk management products and services. The company provides
unmatched convenience in the United States, serving approximately
49 million consumer and small business relationships with
approximately 5,000 retail banking offices and approximately 16,000
ATMs and award-winning online banking with 30 million active users
and more than 15 million mobile users. Bank of America is among the
world's leading wealth management companies and is a global leader
in corporate and investment banking and trading across a broad
range of asset classes, serving corporations, governments,
institutions and individuals around the world. Bank of America
offers industry-leading support to approximately 3 million small
business owners through a suite of innovative, easy-to-use online
products and services. The company serves clients through
operations in more than 40 countries. Bank of America Corporation
stock (NYSE: BAC) is listed on the New York Stock Exchange.
Visit the Bank of America newsroom for more Bank of America
news.
www.bankofamerica.com
Investors May Contact:Lee McEntire, Bank of America,
1.980.388.6780Jonathan Blum, Bank of America (Fixed Income),
1.212.449.3112Reporters May Contact:Lawrence Grayson, Bank of
America, 1.864.370.6709lawrence.grayson@bankofamerica.comJerry Dubrowski,
Bank of America, 1.980.388.2840jerome.f.dubrowski@bankofamerica.com
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