DOW JONES NEWSWIRES
Bank of America Corp. (BAC) confirmed plans Wednesday to pay
$8.5 billion to settle claims by a group of high-profile investors
who lost money on mortgage-backed securities purchased before the
U.S. housing collapse, while also disclosing a $5.5 billion
second-quarter provision tied to its exposure to government-run
mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC), among
other things.
The bank also expects to record $6.4 billion in other
mortgage-related charges in the period, including $2.6 billion to
write off the balance of goodwill in the consumer real-estate
services business.
Shares climbed 5% to $11.10 premarket and are down 19% so far
this year through Tuesday's close.
The investor settlement ends a nine-month fight with a group of
22 investors who hold more than $56 billion in mortgage-backed
securities, including the giant money manager BlackRock Inc. (BLK),
the insurer MetLife Inc. (MET) and the Federal Reserve Bank of New
York. That payment marks the largest such settlement by a
financial-services firm to date, exceeding the total profits of the
Charlotte, N.C., bank since the onset of the financial crisis in
2008, The Wall Street Journal reported Tuesday.
"This is another important step we are taking in the interest of
our shareholders to minimize the impact of future economic
uncertainty and put legacy issues behind us," Chief Executive Brian
Moynihan said. "We will continue to act aggressively, and in the
best interest of our shareholders, to clean up the mortgage issues
largely stemming from our purchase of Countrywide."
Excluding mortgage and other items, Bank of America expects
earnings of 28 cents to 33 cents a share for the second quarter.
Analysts polled by Thomson Reuters projected 28 cents a share.
The dispute between Bank of America and the mortgage investors
began last fall when they alleged in a letter to the bank that
securities they scooped up before the financial crisis from
Countrywide, acquired in 2008, were full of loans that didn't meet
sellers' promises about the quality of the borrowers or the
collateral.
Earlier this year, the bank reached settlements with Fannie Mae
and Freddie Mac and bond insurer Assured Guaranty Ltd. (AGO).
Fannie Mae and Freddie Mac agreed to a $3 billion settlement in
January, and investors continued to pepper the bank with questions
about its future exposure to repurchase liabilities.
-By Lauren Pollock, Dow Jones Newswires; 212-416-2356;
lauren.pollock@dowjones.com