The government has reached a settlement with Bank of America over its role in the sale of mortgage-backed securities in the run-up to the financial crisis, the Justice Department announced Thursday. The agreement will provide about $1 billion in assistance to thousands of Floridians, said Attorney General Pam Bondi.
At a news conference, U.S. Attorney General Eric Holder said the bank and its Countrywide and Merrill Lynch subsidiaries had “engaged in pervasive schemes to defraud financial institutions and other investors” by misrepresenting the soundness of mortgage-backed securities.
The settlement totals $16.6 billion with most of the money going to settle federal and state civil claims by entities related to residential mortgage-backed securities, collateralized debt obligations and other types of fraud.
The settlement will also make money available to provide assistance, including principal reductions on loans and providing new loans to credit-worthy borrowers, according to the Department of Justice.
Bank of America, the second largest in the U.S., agreed to pay a $5 billion cash penalty, another $4.6 billion in remediation payments and provide about $7 billion in relief to struggling homeowners.
Bondi’s office released a letter from Bank of America that said about $1 billion of that money would go to Florida, which had large numbers of foreclosures and other problems in the housing market beginning with the Great Recession.
Bondi said the money would help nearly 17,000 Floridians.