Bank of America has finally reached the end of it's talks and negotiations with the US Justice Department. The agreement has turned out to be a record setting settlement in more than just one way.
Bank of America has been fined a record-setting amount of $16.65 Billion dollars for its acts of financial fraud leading up to and during the financial crisis.
Of the major banks that were charged with fraud, JP Morgan Chase, Citigroup, and others, Bank of America set the record for the largest settlement amount.
Not only was it the largest settlement amount, but Bank of America also received the largest civil settlement ever handed out to a single entity in American history.
The civil settlement is a whopping $5 billion penalty to the US Justice Department under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). This also, is the largest of its kind ever in American history.
The big bank was found guilty of financial fraud on multiple counts. These acts which they were found guilty of, resulted in the economic meltdown and housing market crash now known as the ‘Financial Crisis'.
Bank of America was charged with knowingly selling crappy residential mortgage-backed securities, knowingly misrepresenting information to borrowers, and numerous other acts of corruption. The big bank committed fraud knowingly and this resulted in thousands and thousands of individuals going under on their mortgages and/or losing their homes. It caused financial ruin for thousands of businesses and individuals alike.
As a way to rectify the wrong done to the American people, BOA was charged with fraud and forced to set up consumer relief packages for the devastation they caused to borrowers, investors and homeowners.
Breakdown: Where's the Money Going?
$5 billion Civil Penalty to the US Justice Department
$1.8 billion to settle federal fraud claims for bank's origination and sale of mortgages.
$1.03 billion to settle claims with the FDIC
$135.84 million to settle claims with SEC
$300 million to settle claims in California
$45 million to settle claims in Delaware
$200 million to settle claims in Illinois
$23 million to settle claims in Kentucky
$75 million to settle claims in Maryland
$300 million to settle claims New York
Whats left of the settlement, $7 billion, will go to various types of programs to provide relief to struggling homeowners. Some of the assistance is as follows:
Principal reduction loan modifications
New loans to credit worthy borrowers struggling to get a loan
Donations to assist communities in recovering from the financial crisis
Financing for affordable rental housing.
$490 million in a tax relief fund to be used to help defray some of the tax liability that will be incurred by consumers receiving certain types of relief if Congress fails to extend the tax relief coverage of the Mortgage Forgiveness Debt Relief Act of 2007.
Funds will be set up to help defray tax liability as a result of mortgage modification, forbearance or forgiveness.
What This Settlement Does Not Do:
The settlement does not release individuals from civil charges.
This settlement does not absolve Bank of America, its current or former subsidiaries and affiliates ( Countrywide, Merrill Lynch ) or any individuals from potential criminal prosecution.
To date, $36.65 billion has been recovered for American consumers and investors thanks to the efforts of President Obama's Financial Fraud Enforcement Task Force and its Residential Mortgage-Backed Securities (RMBS) Working Group.
"This agreement is notable because it achieves real accountability for the American people and helps to rectify the harm caused by Bank of America's conduct through a $7 billion consumer relief package that could benefit hundreds of thousands of Americans still struggling to pull themselves out from under the weight of the financial crisis."- Attorney General West
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