US banks to pay out $20bn in claims
US banks agreed to pay out more than $20 billion yesterday to settle claims arising from the mortgage crisis, with compensation for bad loans wiping out most of Bank of America’s earnings for a second successive quarter.
Five years after the financial crisis, Bank of America, the second-biggest US bank by assets, agreed to pay $11.6 billion to Fannie Mae, the government-controlled mortgage company, to resolve a protracted legal battle over bad loans.
In a separate settlement, 10 mortgage lenders, including Bank of America, Wells Fargo, JPMorgan Chase and Citigroup, agreed to pay more than $8 billion to settle the regulators’ allegations that they were guilty of widespread abuse of the foreclosure system that allowed banks to seize homes from defaulting borrowers.
The two settlements add to the tens of billions banks have already paid out in fines and compensation for loose lending standards.
Bank of America is also one of 10 mortgage providers to strike a settlement with the Federal Reserve and Comptroller of the Currency to resolve claims they cut corners and broke rules in the way they processed foreclosures.
– Copyright The Financial Times Limited 2013.