(CN) – Bank of America will pay $8.5 billion to settle investors’ demands that it repurchase $47 billion in mortgage-backed securities originating from Countrywide Financial.
Bank of America bought Countrywide for $4 billion in 2008 after Countrywide collapsed, becoming a poster boy of the mortgage-backed securities fiasco and the worldwide financial crisis it precipitated.
The 22 investors that demanded the $47 billion in repurchases include the Federal Reserve Bank of New York, Goldman Sachs, New York Life Investment Management and Prudential Investment Management, BofA said in a statement this morning (Wednesday).
The bank’s statement, issued from its Charlotte, N.C., headquarters, began: “Bank of America Corporation today announced that it has reached an agreement to resolve nearly all of the legacy Countrywide-issued first-lien residential mortgage-backed securitization (RMBS) repurchase exposure, representing 530 trusts with original principal balance of $424 billion.”
BofA CEO Brian Moynihan said in the statement that the $8.5 billion settlement would “minimize the impact of future economic uncertainty and put legacy issues behind us” as the bank “clean(s) up the mortgage issues largely stemming from our purchase of Countrywide.”
The settlement requires court approval.
Bank of America is expected to post an enormous second-quarter loss this year, in the range of $9 billion, it said in its statement.