Bank of America (BAC) Confirms Terms in Global Settlement Ruling, Will Pay $11.8 Billion
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Bank of America Corporation (NYSE: BAC) today confirmed it has joined the other four largest mortgage servicers in agreeing in principle to the terms of a global settlement resolving federal and state investigations into certain origination, servicing and foreclosure practices.
The settlement with 49 state attorneys general, the United States Department of Justice and other federal agencies would extend additional relief to homeowners who are struggling to make mortgage payments and to make refinancing options available to more homeowners.
Under the agreements in principle, Bank of America expects to develop new or enhanced programs to provide borrower assistance and refinancing assistance, to make direct payments to state and federal governments and borrower restitution, and to agree to national servicing standards. The agreements in principle are subject to ongoing discussions among the parties and completion and execution of definitive documentation, as well as required regulatory and court approvals.
The company would develop proprietary programs to provide expanded mortgage modification solutions, including broader use of principal reduction if permitted by the mortgage investor. Short sales would be further facilitated, and the company may offer additional assistance programs, for example deeds-in-lieu of foreclosure and funds for families transitioning out of homeownership. Programs for unemployed, military service members and other customers with identified special situations also may be enhanced. On mortgages that Bank of America owns, the company would expand refinancing opportunities or lower interest rates to provide reduced payments for many homeowners who are current on their payments but owe more than the current value of their homes.
Bank of America is finalizing its program enhancements and expects to provide additional details of eligibility requirements and implementation plans following finalization of the settlement terms.
Under an agreement in principle with the Federal Housing Administration (FHA), Bank of America also expects to resolve and otherwise limit its exposure for certain claims relating to the origination of FHA-insured mortgage loans, primarily by Countrywide prior to and for a period following Bank of America’s acquisition of that lender.
Bank of America’s commitment under the agreements in principle is $11.8 billion, including the following:
The settlement with 49 state attorneys general, the United States Department of Justice and other federal agencies would extend additional relief to homeowners who are struggling to make mortgage payments and to make refinancing options available to more homeowners.
Under the agreements in principle, Bank of America expects to develop new or enhanced programs to provide borrower assistance and refinancing assistance, to make direct payments to state and federal governments and borrower restitution, and to agree to national servicing standards. The agreements in principle are subject to ongoing discussions among the parties and completion and execution of definitive documentation, as well as required regulatory and court approvals.
The company would develop proprietary programs to provide expanded mortgage modification solutions, including broader use of principal reduction if permitted by the mortgage investor. Short sales would be further facilitated, and the company may offer additional assistance programs, for example deeds-in-lieu of foreclosure and funds for families transitioning out of homeownership. Programs for unemployed, military service members and other customers with identified special situations also may be enhanced. On mortgages that Bank of America owns, the company would expand refinancing opportunities or lower interest rates to provide reduced payments for many homeowners who are current on their payments but owe more than the current value of their homes.
Bank of America is finalizing its program enhancements and expects to provide additional details of eligibility requirements and implementation plans following finalization of the settlement terms.
Under an agreement in principle with the Federal Housing Administration (FHA), Bank of America also expects to resolve and otherwise limit its exposure for certain claims relating to the origination of FHA-insured mortgage loans, primarily by Countrywide prior to and for a period following Bank of America’s acquisition of that lender.
Bank of America’s commitment under the agreements in principle is $11.8 billion, including the following:
- Approximately $7.6 billion in borrower assistance, including targeted principal reduction.
- Approximately $1.0 billion in refinancing assistance to customers in the participating states.
- Approximately $2.25 billion in direct payments to state and federal governments and in borrower restitution, of which $1.9 billion would be an upfront cash payment and the remaining $350 million, would be paid only if Bank of America failed to meet certain principal reduction thresholds over a three-year period.
- Up to $1.0 billion in payments to settle FHA claims, of which $500 million would be an upfront cash payment, and the remaining $500 million would be paid only if Bank of America fails to meet certain principal forgiveness levels over a three-year period.
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