AP Source: BofA nearing $8.5B deal on claims

LOS ANGELES (AP) -- Bank of America Corp. was close to finalizing a deal late Tuesday that calls for the lender to pay $8.5 billion to settle claims from a group of investors who bought mortgage-backed securities from the lender, according to a person familiar with the settlement talks.
The Charlotte, N.C., bank was nearing an agreement with the investor group and was expected to announce a done deal as early as Wednesday, the person said on condition of anonymity because the matter was still developing.
Calls to a Bank of America spokesman were not immediately returned.
The investors, which include the Federal Reserve Bank of New York and Blackrock Financial Management, have been pressing the lender for almost a year to buy back defaulted mortgages made by its Countrywide unit.
The Fed is involved because it took over assets held by American International Group Inc., which faltered under the weight of bad home loans. Bank of America acquired Countrywide Financial Corp. in 2008.
Should it stand, the proposed payout goes well beyond other settlement deals entered into by the bank to resolve mortgage buyback disputes.
In January, the lender paid $2.6 billion as part of an agreement to settle buyback claims on home loans it sold to Fannie Mae and Freddie Mac. In April, the bank agreed to pay up to $1.6 billion to Assured Guaranty Ltd., an insurer that also pressed the bank to repurchase its shoddy mortgages.
If approved, the latest settlement would address a significant slice of Bank of America's mortgage buyback claim risk.
A Wall Street Journal report late Tuesday estimated the group of 22 high-profile investors holds more than $56 billion in mortgage-backed securities that are at the center of the dispute.
The investors have argued that Countrywide's practice of modifying loans found to have faulty paperwork or those written outside of normal underwriting standards breached signed agreements with the investors. By continuing to service bad loans rather than speeding up foreclosures, the group has claimed, Countrywide ran up servicing fees, enriching itself at the expense of investors.
Bank of America has dismissed suggestions that its handling of loan modifications and other efforts to prevent foreclosure have violated the terms of the mortgage-backed securities that the investors hold.
Shares of Bank of America gained 14 cents, or 1.3 percent, to $10.96 in aftermarket trading on Tuesday. The shares slipped 3 cents to $10.82 during the regular session.