The last of the lender’s significant litigation resulting from the 2008 mortgage meltdown has been resolved with a $1.84 billion payment from Bank of America to bond insurer Ambac Financial Group, the bank announced in a filing on Friday, Reuters reports.
The agreement puts an end to the company’s lengthy legal struggle over its regrettable acquisition of Countrywide, which was once the biggest mortgage lender in the United States, during the financial crisis. The lender is located in Charlotte, North Carolina.
Prior to the start of trading, Ambac shares increased by roughly 24%. Its third and fourth quarter financial statements will show a benefit from the settlement of around $390 million.
In premarket trading, Bank of America’s shares increased by 0.5%. According to the filing, the second-largest U.S. lender had already put aside cash to cover the payment but will now suffer a $354 million expenditure for the settlement when it announces third-quarter profits on October 17. Further comment from the bank was rejected.
Ambac guaranteed securities worth $25 billion that were backed by Countrywide loans between 2004 and 2006. According to the insurer, Bank of America failed to buy the loans as required in 80% of the cases because of lax underwriting guidelines or other flaws that went against insurance contracts.
Ambac tried to recover billions in insurance claims that it had “paid to cover investor losses on securities” backed by 375,000 Countrywide home loans.
Bank of America spent years cleaning up the impact of the 2008 crisis. It repaid a $45 billion bailout by taxpayers and was slapped with more than $76 billion in fines in the decade after.
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