Bank of America has agreed to modify existing mortgage loans and make new loans to “credit worthy” borrowers as part of its record $16.65bn settlement with US authorities over the mis-selling of mortgage bonds.
As well as paying $9.65bn in cash, the bank has agreed to offer $7bn in relief to consumers.
The Department of Justice said on Thursday that the 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.”
Bank of America is accused by US authorities of selling billions of dollars of mortgage-backed bonds that misrepresented the quality of the loans.
Paul J. Fishman, the attorney general for District of New Jersey, one of the states involved in the settlement, said that the misrepresentation of the mortgages in the bonds: “Undermines investor confidence in our financial institutions.
“Today’s record-breaking settlement, which includes the resolution of our office’s imminent multibillion-dollar suit for FIRREA penalties, reflects the seriousness of the lapses that caused staggering losses and wider economic damage.”
