Bank of America pays record $8.5bn on mortgage claims

NEW YORK: Bank of America announced Wednesday that it would pay $8.5 billion to settle investor losses on mortgage-backed securities packaged with dodgy loans from Countrywide Financial ahead of the US housing collapse.

And after an additional $5.5 billion charge against potential liabilities in yet-unclaimed investor losses, the largest US bank said it expected a quarterly net earnings loss of up to $9.1 billion.

The payment, to a group of 22 large private investment groups who invested in packaged securities including poorly documented mortgages from Countrywide, which Bank of America took over in 2007, is the largest settlement by a financial services firm stemming from the financial crisis.

"This is another important step we are taking in the interest of our shareholders to minimize the impact of future economic uncertainty and put legacy issues behind us," said Bank of America Chief Executive Officer Brian Moynihan.

"We will continue to act aggressively, and in the best interest of our shareholders, to clean up the mortgage issues largely stemming from our purchase of Countrywide."

Over the last six months, Bank of America has announced three agreements aimed at reducing the exposure to legacy mortgage issues related to Countrywide, once one of the country's largest home loan financers.

In January, Bank of America announced agreements with two of its largest counterparties, Fannie Mae and Freddie Mac.

The 22 investment groups taking part in the settlement represented 530 separate residential mortgage-backed securitization trusts which had a principal valuation of some $424 billion.

Copyright AFP (Agence France-Presse), 2011