In yet another resolution of claims related to the sale of
risky mortgage based securities (MBS),
Bank of America Corporation
) has agreed to pay $165 million to the U.S. regulator for credit
unions - National Credit Union Administration (NCUA). Yet, BofA
neither accepted nor denied any wrong doing.
Countrywide Financial - acquired by BofA in 2008 - had sold risky
MBS to five corporate credit unions, which led to their failure
following the financial crisis. Since then, the regulator for
credit unions has been trying to recover the losses.
Earlier in February, BofA revealed that it had reached an initial
agreement with the credit union regulator to settle the claims,
without disclosing the amount required to be paid. Also, the
company had stated that no additional reserves will be required
to settle the claims.
BofA is the fourth bank to settle credit union regulator's claim.
Earlier, the regulatory body had reached settlements with
Deutsche Bank AG,
HSBC Holdings plc
) and Citigroup Inc. worth about $171 million. Apart from these,
other global banks including Credit Suisse Group, Goldman Sachs
Wells Fargo & Company
JPMorgan Chase & Co.
) and Barclays PLC are facing lawsuits from the credit union
regulator for similar charges.
For BofA, the settlement of the claim is a positive step towards
resolving the issues pertaining to the sale of MBS. Over the past
few months, the company has been trying hard to overcome the
losses from its home loan business.
In Jan 2013, BofA announced nearly $14 billion worth of
settlements to end its mortgage related problems. Further, in
2011, the company had reached an $8.5 billion settlement deal
with the private investors who had brought those risky MBS.
We believe that the resolution of claims will go a long way to
improve BofA's overall efficiency. The company has been striving
hard to regain its past glory. For this, it has announced several
initiatives that have now started bearing fruits. All the
initiatives will lead to enhanced financial performance going
Currently, BofA retains a Zacks Rank #3 (Hold).
BANK OF AMER CP (BAC): Free Stock Analysis
HSBC HOLDINGS (HBC): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
To read this article on Zacks.com click here.