Bank Of America May Pay At Least Another $12 Billion For Mortgage-Related Hijinks
According to the Wall Street Journal, BofA is currently chatting with the Justice Dept. and attorneys general from several states about paying at least $12 billion to close the books on multiple cases involving the bank’s mishandling of toxic home loans in the run-up to the collapse of the housing market.
The plan is for at least $5 billion of that total to go toward consumer relief in the form of things like principal reductions, lower monthly payments, and the clean up of blighted, abandoned properties in lower-income neighborhoods.
The Journal reports that the ultimate figure for this settlement could pass the $12 billion mark and may even surpass last year’s $13 billion settlement with JPMorgan Chase as the DOJ’s largest ever deal with a single bank.
While many penalties on big banks have been seen as a slap on the wrist compared to the amount of money taken in by bad behavior, the Journal points out that $12 billion is more than BofA’s total profit for 2013. Of course, since almost half of it will be meted out in non-cash forms like loan reductions, it’s not like BofA will be handing Attorney General Eric Holder a larger poster board check with “Twelve Billion Dollars” written on it.
The bank is reportedly willing to pay up if more than half of the penalty is this so-called “soft money,” which would gradually ding the BofA coffers, easing the impact of the settlement on the bank’s finances. However, it appears that DOJ wants a significant portion of this penalty to come in cash, presumably to improve the government’s image of being too friendly to the banks that played fast and loose with the rules (and people’s money) in the years leading up to the housing collapse.
A failure to reach a settlement could result in the DOJ suing BofA. Given the many billions the bank has already spent (on top of the penalties) on lawsuits in the last five years, it likely wants to avoid more costly litigation.
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