Newsletter | Volume 1

Issue I
Issue II
Issue III
Issue IV
Issue V
Issue VI
Issue VII
Issue VIII
Issue IX
Issue X
Issue XI
Issue XII
Issue XIII
Issue XIV
Issue XV

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When is a fine or settlement obscene?

Bank of America will pay $16.65 billion to settle fraud claims by federal and state enforcement agencies and regulators that relate back to the financial crisis of 2008. It is "the largest civil settlement with a single entity in American history," The agreement is indeed historical and goes far beyond the cost of doing business.

For a change, this settlement does not release individuals from civil charges or absolve Bank of America, its current or former subsidiaries and affiliates, or any individuals from potential criminal prosecution. An independent monitor will be appointed to determine if the bank satisfies its obligations and that BofA is following the rules of the settlement.

Let's see who the stakeholders in the fine are and where the money is going from the breakdown provided by the US Justice Department:
  • Almost $10 billion will be paid to settle federal and state civil claims by various entities related to residential mortgage-backed securities, collateralized debt obligations, and other types of fraud
  • Bank of America will pay a $5 billion civil penalty to settle a Justice Department claims under the Financial Institutions Reform, Recovery and Enforcement Act
  • About $1.8 billion will be paid to settle federal fraud claims related to the bank's origination and sale of mortgages
  • $1.03 billion will be paid to settle federal and state securities claims by the Federal Deposit Insurance Corporation
  • $135.84 million will be paid to settle claims by the Securities and Exchange Commission
  • $300 million will be paid to settle claims by the state of California
  • $45 million to settle claims by the state of Delaware
  • $200 million to settle claims by the state of Illinois
  • $23 million to settle claims by the Commonwealth of Kentucky
  • $75 million to settle claims by the state of Maryland, and
  • $300 million to settle claims by the state of New York.

Bank of America will provide the remaining $7 billion in the form of relief to aid hundreds of thousands of consumers harmed by the financial crisis precipitated by the unlawful conduct of Bank of America and its Merrill Lynch and Countrywide units.

That relief will take various forms, including principal reduction loan modifications that result in numerous homeowners no longer being underwater on their mortgages and finally having substantial equity in their homes.

It will also include new loans to creditworthy borrowers struggling to get a loan, donations to assist communities in recovering from the financial crisis and financing for affordable rental housing.

Finally, Bank of America has agreed to place over $490 million in a tax relief fund to be used to help defray some of the tax liability that will be incurred by consumers receiving certain types of relief if Congress fails to extend the tax relief coverage of the Mortgage Forgiveness Debt Relief Act of 2007.

If Bank of America fails to live up to its agreement by August 31, 2018, it must pay liquidated damages in the amount of the shortfall to organizations that will use the funds for state-based Interest on Lawyers' Trust Account (IOLTA) organizations and NeighborWorks America, a non-profit organization and leader in providing affordable housing and facilitating community development.