Leading lender settles massive suit

by Justin da Rosa03 Nov 2015
Bank of America has agreed to a $335 million settlement in a lawsuit that alleges the institution mislead shareholders about its exposure to mortgage securities.

The bank was sued by a number of shareholders, led by the Pennsylvania Public School Employee’s Retirement System, according to Reuters. The shareholders allege they were misled into purchasing Bank of America shares in 2009 and 2010, which included stock that was eventually sold to repay $45 billion in government bailout money, according to Reuters.

Shareholders also alleged the bank knew it couldn’t raise enough funds if it revealed it could not buy back billions worth of securities backed by risky loans.

They also alleged the bank was aware the record keeping on its Mortgage Electronic Registration Systems registry was insufficient and that, as a result, the bank would not be able to legally foreclose on thousands of delinquent mortgages.

The Bank of America announced the settlement during its quarterly report filed with the US Securities Exchange Commission on Friday. It said court approval is still pending.

The country’s second largest bank has spent over $70 billion since the economic crisis on regulatory and legal matters.

In late 2011, the bank agreed to a $335 million in another high profile settlement – that time for discriminatory lending.

“The settlement provides $335 million in compensation to victims of Countrywide’s discrimination during a period when Countrywide served as one of the nation’s largest single-family mortgage lenders and originated more than 4 million residential mortgage loans,” Former U.S. Attorney General Eric Holder told Forbes at the time.

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