WASHINGTON – Top U.S. banks agreed Monday to pay out $20 billion in fines and compensation as regulators, borrowers and investors extract more payback over the housing and financial crisis.
Bank of America endured the harshest punishment, mainly due to its 2008 takeover of home lender Countrywide Financial, when it agreed to pay mortgage finance giant Fannie Mae $11.6 billion to settle claims that it sold Fannie hundreds of billions of dollars’ worth of dud home loans.
Many of those loans, packed into securities, plunged into default after 2006’s housing bubble crash, destroying the value of Fannie’s investments and forcing it into a government bailout.
Meanwhile, 10 banks, including Bank of America, agreed Monday with regulators to shell out $8.5 billion in cash and assistance to homeowners to settle accusations that they had forced millions into foreclosure while ignoring borrowers’ attempts to make good on their mortgages.
The two settlements were just the latest in the ongoing shakeout from the financial crisis, rooted in housing market implosion and the subsequent tanking of the multitrillion-dollar mortgage-backed securities market.
The shakeout has left the banks in the sights of regulators, of powerful state-controlled Fannie Mae, equities investors, troubled homeowners and their fellow banks.
Tens of billions in fines and compensation have been assessed, with much more to come.
In the largest so far, in February 2012, five leading banks were ordered to pay more than $25 billion over foreclosure abuse in a settlement with 49 states.
Four other banks that were investigated, including giants Ally Financial and HSBC, did not sign on to the $8.5 billion deal with federal regulators. Several other banks being probed were also not part of last year’s 49-state deal, meaning they still face potential liability.