Bank of America to pay record $17bn settlement for mortgage sales

The settlement is by far the largest deal the Justice Department has reached with a bank over the 2008 mortgage meltdown

The Justice Department has reached a $16.65 billion settlement with Bank of America for financial fraud leading up to and during the financial crisis, the largest civil settlement with a single entity in American history, to resolve federal and state clai (GETTY IMAGES)

The US government has reached a $16.65 billion settlement with Bank of America over its role in the sale of mortgage-backed securities in the run-up to the financial crisis, the Justice Department announced Thursday.

The deal calls for the bank, the second-largest in the US, to pay a $5 billion cash penalty and provide billions of dollars of relief to struggling homeowners. Bank of America said its cash payouts will total $9.65 billion.

The settlement is by far the largest deal the Justice Department has reached with a bank over the 2008 mortgage meltdown. In the last year, JPMorgan Chase agreed to a $13 billion settlement while Citigroup reached a separate $7 billion deal.

"This historic resolution — the largest such settlement on record — goes far beyond the cost of doing business," Attorney General Eric Holder told a news conference.

"Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to struggling homeowners, borrowers and communities affected by the bank's conduct. This is appropriate given the size and scope of the wrongdoing at issue."

Associate Attorney General Tony West said the settlement of nearly $17 billion is the largest the Justice Department has ever reached with a single entity in American history.

At a news conference, Justice Department officials said the settlement does not release individuals from civil charges, nor does it absolve Bank of America, its current or former subsidiaries and affiliates or any individuals from potential criminal prosecution.

Of the $16.65 billion, almost $10 billion will be paid to settle federal and state civil claims by entities related to residential mortgage-backed securities, collateralized debt obligations and other types of fraud.

An independent monitor will determine whether Bank of America is satisfying its obligations under the settlement.

Additional reporting PA