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Harry Cassin
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Editor Emeritus

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Where’s BofA’s $17 billion going?

Bank of America is paying $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’s “the largest civil settlement with a single entity in American history,” the DOJ said Thursday.

Where’s the money going?

Here’s a breakdown provided by the 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 the 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, the DOJ said.

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 credit worthy 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.

*     *     *

How will anyone know if BofA is following the rules of the settlement?

An independent monitor will be appointed to determine if the bank is satisfying its obligations. 

And finally, the DOJ said: “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.” 

Those organizations will use the funds for foreclosure prevention and community redevelopment, legal assistance, housing counselling and neighborhood stabilization, the DOJ said.

*     *     *

The settlement is truly historic, Attorney General Eric Holder said Thursday, and goes far beyond a cost of doing business.

The settlement doesn’t release individuals from civil charges or absolve Bank of America, its current or former subsidiaries and affiliates, or any individuals from potential criminal prosecution, the DOJ said.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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  1. We lost our home and our credit has been ruined – so where is the relief for me and my husband? The states and everyone else gets something but for those of us who had loans through Countrywide and lost our homes to foreclosure – it looks like we get nothing.

    Is there nothing in place for those of us – we lost it all get and get nothing back.

  2. Your article reads like the DOJ glowing, self-acclaiming press release. The prospect of future identification and prosecution of the individual wrongdoers is extremely remote. The statutes of limitations have expired as to the 2006-8 wrongful conduct. Both the SEC and the DOJ continue to follow settlement guidelines that actually encourage, rather than deterring, corporate wrongdoing. In this high tech world, risk management analysis is all about what profitable activities corporations can either get away with or reap larger profits than the potential penalties. Individual senior management wrongdoers are almost never charged. This creates the incentive not only to sail close to the line, but over the line if the projected benefits outweigh the detriments. The securities analysts pay little, if any, attention to these settlements, even in the rare cases where wrongful conduct is admitted. The fact that a wrongdoer's stock price does not fall, and often goes up, upon announcement of the DOJ or SEC settlement tells us something about the ineffectiveness of our regulatory agencies.

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