Bank of America Corp (NYSE:BAC) has reportedly enhanced its offer from $12 billion to $13 billion to settle a probe into mortgage securities sold by the bank, according to a July 16th Wall Street Journal report.
Citing people familiar with the development, The Wall Street Journal reports the bank met with U.S. Justice Department representatives on Tuesday, although apparently no progress was made towards a final deal.
Bank of America’s deal with DOJ
As reported by ValueWalk, last month, Bank of America Corp (NYSE:BAC) was said to be in advanced negotiations to pay no less than $12 billion for its handling and packaging of shoddy mortgages. Despite the bank pushing for a settlement in that neighborhood, there were calls by several groups for a payment considerably larger than the $12 billion the bank was offering.
Interestingly, the $12 billion fine would exceed the bank’s profit of $11.43 billion in 2013. However, many people believe that Bank of America Corp (NYSE:BAC)’s conduct was worse than JPMorgan Chase & Co. (NYSE:JPM)’s, and last year the latter bank paid a record $13 billion for its actions in the run-up to the financial crisis.
According to The Wall Street Journal report, the latest offering of a $13 billion settlement by Bank of America Corp (NYSE:BAC) would be in the form of cash and consumer benefits.
DOJ reportedly seeking $17 billion
Though Bank of America Corp (NYSE:BAC) originally wanted to pay only $12 billion, the Justice Dept has reportedly sought $17 billion from the bank. The investigation relates to the Charlotte-based bank and its predecessor Countrywide being suspected of selling mortgage securities backed by loans that were made improperly and known to be faulty.
While unveiling its second quarter results Monday, Citigroup Inc. (NYSE:C) announced that it will pay $7 billion to resolve the investigation of its mortgages. Officials accused the bank of selling bad mortgages preceding the financial crisis. Citigroup’s settlement included $4.5 billion in cash and $2.5 billion in consumer relief.
Bank of America Corp (NYSE:BAC) announced its second quarter results today, and indicated that its results include litigation expenses of $4.0 billion and the bank has reached settlement with AIG to resolve residential mortgage-backed securities claims for $650 million.