The settlement covers claims over residential mortgage-backed securities sold by Bank of America to AIG, according to a CNBC report. AIG suffered losses on the securities. It also covers AIG’s objections to BOA’s recent $8.5 billion settlement of its Countrywide unit’s mortgage repurchase obligations to other investors.
“We are very pleased to have this matter resolved,” AIG President and CEO Robert H. Benmosche said in a statement. “Today’s settlement is a just resolution that’s in the best interest of our various stakeholders.”
The AIG settlement is the latest in a long line of legal headaches for Bank of America. The bank is currently facing a $1 billion lawsuit over mortgage-backed securities sold by its Merrill Lynch unit and is currently in negotiations with federal and state authorities to settle mortgage-related claims that could cost the bank up to $12 billion.
To make matters worse, this morning BOA reported a 43% drop in second-quarter profits, driven in large part by soaring legal costs and plummeting mortgage revenues. Earnings fell to $2.04 billion, or 19 cents per share, in the second quarter. That’s down from $3.58 billion, or 32 cents per share, in Q2 of 2013.
Bank of America will shell out $650 million to AIF over mortgage-related disputes.