By Aruna Viswanatha
WASHINGTON, April 2 Bank of America Corp
agreed to pay $165 million to settle charges by the U.S. credit
union regulator involving sales of mortgage-backed securities to
corporate credit unions that led them to fail, the regulator
said on Tuesday.
In February, the bank disclosed it had reached a preliminary
agreement with the National Credit Union Administration, and
said it would be covered by existing reserves, but did not
disclose a value at the time.
The settlement adds to a growing list of mortgage-related
legal troubles Bank of America has been able to put behind it,
after sustaining more than $40 billion in losses from its home
loan business since the financial crisis.
Most of those losses stemmed from its 2008 purchase of
Countrywide Financial, once the largest U.S. subprime mortgage
The new settlement is intended to resolve claims concerning
mortgage securities offerings that the regulator had threatened
to sue the bank and its Countrywide and Merrill Lynch units
over, Bank of America said in its annual report.
A bank spokesman declined comment on Tuesday beyond the
earlier filing. The credit union regulator did not release
settlement papers and declined to provide additional details
about the deal.
In recent months, Bank of America has moved closer to ending
its mortgage troubles, with more than $14 billion in settlements
announced in January alone.
Around $3 billion went to end a loan-by-loan review of past
foreclosures mandated by the government. Another $11.6 billion
went to resolve allegations from government mortgage finance
company Fannie Mae that the bank improperly sold mortgages that
later soured, and to resolve questions about foreclosure delays.
The bank has also sought to sign a $8.5 billion settlement
to resolve claims from private investors who purchased toxic
securities, but that deal is still awaiting approval in New York
The credit union regulator previously indicated it objected
to that proposed deal, but on Friday it withdrew its notice of
intent to object without providing a reason for the change.
Separately, the regulator has filed 10 lawsuits against
banks - including units of JPMorgan Chase & Co, Barclays
, Credit Suisse, Goldman Sachs and
Royal Bank of Scotland - over mortgage-backed securities
they sold to corporate credit unions that later collapsed due to
losses on the securities.
A consolidated hearing in the cases is scheduled for April
29 in Kansas federal court, where the lawsuits are filed.
The regulator has settled similar claims against Citigroup
, Deutsche Bank and HSBC for a total
of$170 million, with Deutsche Bank paying around $145 million.
The National Credit Union Administration has been trying to
recover losses related to the failure of five institutions that
it seized in 2009 and 2010 after they ran into trouble due to
the crumbling housing market.
The wholesale credit unions have experienced more troubles
than their retail counterparts because they did not face the
same restrictions on permitted investments, leading to big
losses during the financial crisis.
"We have a statutory obligation to secure recoveries for
credit unions and ensure that consumers remain protected,"
Debbie Matz, the chairman of the regulator's board, said in the
statement announcing the Bank of America settlement. "We will
continue to expend every possible effort to fulfill that
Bank of America did not admit fault as part of the
settlement, the credit union regulator said.