By Melisa Mercardo
Their legal woes stem primarily from its purchase of Countrywide Financial Corporation and Merrill Lynch during the financial crisis because it exposed itself to liability due to fraudulent mortgage-related misconduct.
By virtue of the settlement, Bank of America admitted to having misled the public, particularly the investors, regarding the condition of mortgage loans. To put it simply, the bank allowed investors to borrow big amounts which they could not later on pay resulting in billions of losses and millions of foreclosures.
Out of the $16.65 billion compensation offer, $9 billion will be paid in cash to the federal government, states and government entities while the remaining will be in the form of consumer relief to aid struggling debtors.
Initially, lawyers of Bank of America attempted to argue that it should not suffer for the misconduct and malpractice of Countrywide Financial Corporation and Merrill Lynch committed prior to its acquisition of the two corporations. Later on, however, the bank must have deemed it more convenient to just settle with federal government authorities and made such an offer to the Department of Justice.
With the settlement, Bank of America hopes to put a cap on its legal woes which it had been battling for the past four and a half years costing the bank close to $80 billion. The $16.65 billion settlement offered by Bank of America surpassed the $13 billion compensation paid by J.P. Morgan Chase in a similar investigation last year.