NEW YORK (CBSNewYork/AP) — New York state is getting $800 million as its share of a national $16.65 billion settlement with Bank of America over its role in the sale of mortgage-backed securities in the run-up to the financial crisis.
New York Attorney General Eric Schneiderman announced the settlement Thursday. He says the bank has agreed to pay the state $300 million in cash and $500 million in the form of direct relief to consumers.
“Since my first day in office, one of my top priorities has been to pursue accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy,” Schneiderman said in a statement. “This historic settlement builds upon our work bringing relief to families around the country and across New York who were hurt by the housing crisis, and is exactly what our working group was created to do. The frauds detailed in Bank of America’s statement of facts harmed countless of New York homeowners and investors. Today’s result is a major victory in the fight to hold those who caused the financial crisis accountable.”
As part of the agreement, Bank of America acknowledges that it and its subsidiaries made “serious misrepresentations” to the public about mortgages and mortgage-backed securities, Schneiderman said.
He said the bank also mischaracterized the quality of its loans to the federal government.
The bank has agreed to contribute at least $20 million in cash and property to local governments and nonprofits. Schneiderman’s office said that contribution should allow the state to take over as many as 300 properties that were left vacant by their previous occupants once foreclosure proceedings began.
Another $125 million will go toward affordable rental housing, and $35 million will go to groups that provide legal, housing and community development programs.
“We’re in the midst of an affordability crisis hitting New Yorkers from the very poor to those once solidly middle class,” New York City Mayor Bill de Blasio said in a statement. “We are pushing hard to build and preserve an unprecedented amount of affordable housing to meet this crisis, and the Attorney General’s continued advocacy is proving vitally important in supporting that effort.”
The deal is the largest reached so far over the 2008 mortgage meltdown and the biggest the U.S. Justice Department has ever reached with a single entity.
In the last year, JPMorgan Chase & Co. agreed to a $13 billion settlement while Citigroup reached a separate $7 billion deal.
At a news conference, Attorney General Eric Holder said the bank and its Countrywide and Merrill Lynch subsidiaries had “engaged in pervasive schemes to defraud financial institutions and other investors” by misrepresenting the soundness of mortgage-backed securities. The penalties, Holder said, go “far beyond the cost of doing business.”
The government said the civil settlement does not release individuals from civil charges, nor does it absolve Bank of America, its current or former subsidiaries and affiliates or any individuals from potential criminal prosecution.
Bank of America CEO Brian Moynihan said in a statement that the company believes the settlement “is in the best interests of our shareholders and allows us to continue to focus on the future.”
Of the $16.65 billion, almost $10 billion will be paid to settle federal and state civil claims by entities related to residential mortgage-backed securities, collateralized debt obligations and other types of fraud.
An independent monitor will determine whether Bank of America is satisfying its obligations under the settlement.
Schneiderman said the best way for New York homeowners to find out if they’re eligible is to go to www.aghomehelp.com.
“Do not call some law firm that advertises on the radio that purports to tell you, ‘oh we’ve got your loan already paid off.’ I sometimes hear this stuff on the radio and I’m taken aback,” Schneiderman said. “They say, ‘all of the state attorney generals have settled these mortgage claims, your mortgage may already be paid off, call this number.’ Well I did call that number and I assure you they didn’t like that call.”
For more information on the settlement, click here.
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