More On Legal & Compliancefrom The Advisor's Professional Library
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- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
Bank of America Corp. will pay $16.65 billion to end federal and state probes into mortgage bond sales, the harshest penalty yet related to loans that fueled the 2008 financial crisis, the Justice Department said.
The settlement, which includes $7 billion in consumer relief and a $5 billion penalty, resolves civil investigations by federal and state prosecutors, the U.S. said today.
Negotiations between the second-largest U.S. lender and the government began in March. They’ve dragged on as prosecutors took a more aggressive stance, seeking to dispel criticism of their efforts to punish misconduct that helped fuel the housing bubble and financial crisis. Talks intensified in late July after the bank acquiesced to demands that it raise its offer, people familiar with the matter have said.
The agreement cements Bank of America’s status as the firm punished hardest for faulty mortgage practices. It eclipses Citigroup Inc.’s $7 billion settlement in July and JPMorgan Chase & Co.’s $13 billion accord in November. Bank of America’s settlement also comes on top of its $9.5 billion deal in March to resolve related Federal Housing Finance Agency claims.
Under Chief Executive Officer Brian T. Moynihan, Bank of America has already booked more than $55 billion in expenses tied to home loans, mostly linked to the disastrous 2008 takeover of subprime lender Countrywide Financial Corp.
Countrywide has been blamed by lawmakers and regulators for using lax underwriting standards and predatory lending that fueled its ascent to the biggest U.S. mortgage lender before its collapse and $2.5 billion sale to Bank of America.
The outlines of the deal were reached July 30 — the same day a federal judge in New York ordered the bank to pay $1.3 billion for defective mortgage loans that Countrywide sold to government-sponsored Fannie Mae and Freddie Mac before the crisis — after a phone call between Attorney General Eric Holder and Moynihan, according to one of the people. During that conversation, Holder said they were ready to file a lawsuit in New Jersey if Bank of America didn’t offer an amount closer to the department’s demand of about $17 billion, the person said.
For weeks, the bank hadn’t budged from an offer of about $13 billion, which included at least $5 billion in consumer relief. Negotiations resumed after Citigroup’s July 14 settlement and centered on faulty loans that Bank of America inherited from Countrywide and Merrill Lynch & Co., which it also purchased at the apex of the financial crisis. Prosecutors demanded more of the penalty be paid in cash instead of other remedies, such as mortgage writedowns and consumer relief, another person said.
Other banks that have faced scrutiny over mortgage-backed bond sales include Credit Suisse Group AG, Goldman Sachs Group Inc. and Wells Fargo & Co.
Check out BofA Should Pay $2.1 Billion in Fraud Case, U.S. Says on ThinkAdvisor.