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Bank of America agrees $500m settlement with Countrywide investors Bank of America agrees $500m settlement with Countrywide investors
(about 1 hour later)
Bank of America has reached a record $500m (£328m) settlement with investors who claimed they were misled by its Countrywide unit into buying risky mortgage securities.Bank of America has reached a record $500m (£328m) settlement with investors who claimed they were misled by its Countrywide unit into buying risky mortgage securities.
The settlement requires court approval, and is the largest deal resolving a federal securities class-action case over mortgage-backed securities, lawyers for the plaintiffs said on Wednesday.The settlement requires court approval, and is the largest deal resolving a federal securities class-action case over mortgage-backed securities, lawyers for the plaintiffs said on Wednesday.
Investors had accused Countrywide and other defendants of misrepresenting the risks of securities they sold between January 2005 and November 2007. Countrywide was at the time the largest US mortgage lender, and specialised in loans to people with weaker credit histories or who could not fully document their ability to pay.Investors had accused Countrywide and other defendants of misrepresenting the risks of securities they sold between January 2005 and November 2007. Countrywide was at the time the largest US mortgage lender, and specialised in loans to people with weaker credit histories or who could not fully document their ability to pay.
Bank of America bought Countrywide in July 2008. Lawrence Grayson, a Bank of America spokesman, declined to comment.Bank of America bought Countrywide in July 2008. Lawrence Grayson, a Bank of America spokesman, declined to comment.
Settlement papers are expected to be made public by the end of May, according to Steven Toll, a lawyer for some plaintiffs.Settlement papers are expected to be made public by the end of May, according to Steven Toll, a lawyer for some plaintiffs.
The case is one of many in which investors have sought to hold banks responsible for allegedly misleading them about the quality of mortgage securities.The case is one of many in which investors have sought to hold banks responsible for allegedly misleading them about the quality of mortgage securities.
In May, Bank of America won court approval for a $315m settlement of a similar lawsuit against its Merrill Lynch unit. Wells Fargo & Co has reached a separate $125m settlement.In May, Bank of America won court approval for a $315m settlement of a similar lawsuit against its Merrill Lynch unit. Wells Fargo & Co has reached a separate $125m settlement.
The Countrywide settlement resolves three lawsuits and requires approval by US District Judge Mariana Pfaelzer in Los Angeles.The Countrywide settlement resolves three lawsuits and requires approval by US District Judge Mariana Pfaelzer in Los Angeles.
Wednesday's settlement came as Bank of America reported a lower-than-expected first-quarter profit and falling revenue, sending share in the second-biggest US bank down 3% before the bell on Wednesday.Wednesday's settlement came as Bank of America reported a lower-than-expected first-quarter profit and falling revenue, sending share in the second-biggest US bank down 3% before the bell on Wednesday.
Net income quadrupled to $2.62bn, or 20 cents per share, from $653m, or 3 cents per share a year earlier, as expenses dropped and the bank set aside less money to cover bad loans. But total adjusted revenue fell 8.4% to $23.85bn, partly due to lower revenue from trading in fixed-income securities and mortgages.Net income quadrupled to $2.62bn, or 20 cents per share, from $653m, or 3 cents per share a year earlier, as expenses dropped and the bank set aside less money to cover bad loans. But total adjusted revenue fell 8.4% to $23.85bn, partly due to lower revenue from trading in fixed-income securities and mortgages.
The chief executive, Brian Moynihan, has made progress in building capital and settling mortgage-related lawsuits since taking over in January 2010. But he is under pressure to show the bank can produce higher earnings at a time of low interest rates, stricter regulations and volatile economic conditions. The chief executive, Brian Moynihan, has made progress in building capital and settling mortgage-related lawsuits since taking over in January 2010. But he is under pressure to show the bank can produce higher earnings at a time of low interest rates, stricter regulations and volatile economic conditions. ±