WASHINGTON, D.C. — (Mealey’s) Bank of America Corp. on Wednesday agreed to pay $9.3 billion to settle claims in four separate lawsuits that it, as well as Merrill Lynch & Co. and Countrywide Financial Corp., sold toxic, private-label, residential mortgage-backed securities (RMBS) to Fannie Mae and Freddie Mac in violation of state and federal securities laws, according to a press release issued by the Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac (Federal Housing Finance Agency v. Bank of America Corp., et al., No. 11-6195, S.D. N.Y.; Federal Housing Finance Agency v. Countrywide Financial Corp., et al., No. 12-1059, C.D. Calif.; Federal Housing Finance Agency v. Merrill Lynch & Co., Inc., et al., No. 11-6202, S.D. N.Y.; and Federal Housing Finance Agency v. First Horizon National Corp., No. 11-6193, S.D. N.Y.).
According to the press release, Bank of America agreed to pay $5.83 billion in connection with its sale of the RMBS to Fannie Mae and Freddie Mac between 2005 and 2007, but “[t]he Agreement provides for an aggregate payment of approximately $9.33 billion by Bank of America that includes the litigation resolution as well as a purchase of securities by Bank of America from Fannie Mae and Freddie Mac,” according to the press release.
Allegations of common-law fraud were made in the Countrywide and Merrill Lynch cases. Bank of America owns Merrill Lynch and Countrywide.
The FHFA filed 18 lawsuits in various federal courts throughout the country, alleging misconduct on the part of the nation’s largest financial institutions in connection with the offer and sale of RMBS purchased by Fannie Mae and Freddie Mac from 2005 to 2007.
The FHFA alleged violations of, among other things, Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, the Virginia Securities Act and the District of Columbia Securities Act, as well as claims of fraud and aiding and abetting fraud under New York common law.
Of the 18 suits, the FHFA has reached settlements in 11 of them.
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