WASHINGTON (AP/WBOC) - Bank of American reached a record $16.65 billion settlement with the U.S. Justice Department and six states, including Maryland and Delaware. The settlement was over the company's sale of mortgage-backed securities in the months leading up to the financial crisis. It is by far the largest deal the Justice Department has reached with a bank over the 2008 mortgage meltdown.
Maryland will get $75 million of the settlement, according to Attorney General Doug Gansler.
"With this settlement, Maryland takes another step towards resolving the widespread economic damage caused by these lenders and the mortgage crisis they created out of sheer greed," said Attorney General Gansler. "Marylanders will benefit as defrauded state and local government pension plans receive compensation and distressed consumers receive additional mortgage-related relief and assistance."
Delaware Attorney General Beau Biden says the state of Delaware will receive $45 million of the settlement.
In a statement released by his office, Biden says the money will be used in three ways. Bank of America will pay $31.6 million to fix the damage caused by the housing crisis to Delaware communities. Bank of America will pay $13.4 million to reimburse government entities for losses incurred from investments that were wrongly labeled as low-risk. The bank also agreed to help homeowners by modifying mortgage terms and even forgiving second mortgages. Also under terms of the settlement, Bank of America must provide at least $150 million in assistance to residents in Delaware, Maryland and Kentucky.
But consumer advocates warn relatively few people will be helped in comparison to the devastation triggered by the mortgage bonds, which fueled the worst financial crisis since the 1930s and threw millions of homes into foreclosure.
Only a fraction of homeowners would be eligible for refinancing under the settlement. And the process by which people would qualify and receive aid could drag on for years, with payouts set to be completed as late as 2018.
Those who have already lost homes to a foreclosure or a short sale - when a lender accepts less money from a sale than what the borrower owes - wouldn't likely benefit at all.
"It is certainly better than nothing," said Bruce Marks, chief executive of the nonprofit Neighborhood Assistance Corporation of America. "But for the millions who lost their homes, it reinforces the appearance that the government has not been on their side."
Bank of America has established a hotline for consumers to call if they have questions about the settlement. The BOA consumer hotline is 877-488-7814.
