Wednesday, July 9, 2014

Will BofA settlement talks heat up?

Citigroup could soon reach a $7 billion deal with the Justice Department to resolve a civil investigation involving mortgage-backed securities, according to various news reports this week that cite people familiar with the matter.

For Bank of America, could a Citigroup deal result in increased efforts to resolve similar probes by federal authorities into the Charlotte-based bank?

Who knows? But a New York Times story suggests that it will.

"Now, with the Citigroup matter almost settled, the talks between the government and Bank of America will most likely heat up," the paper reported Tuesday, citing people briefed on the matter.

Bank of America and the Justice Department have disagreed over how much the bank would pay in cash versus consumer relief as part of any settlement, a source familiar with the negotiations told the Observer last month. The settlement would resolve probes into the sale to investors of securities backed by home loans that soured and contributed to the financial crisis.

In an effort to resolve the matter, the bank requested for CEO Brian Moynihan to meet with the U.S. attorney general, the source told the Observer last month.

The source said the accord with Bank of America would be a “global” settlement to resolve other outstanding mortgage-related civil probes, including a lawsuit filed last year by U.S. Attorney Anne Tompkins over "prime" mortgages.

But with the bank and federal authorities failing to reach an agreement over the settlement's terms, the Justice Department has been moving forward with plans to file a civil lawsuit against the bank, according to the source.

Settling with the Justice Department would be a major step for the bank in resolving issues still weighing on it since the financial crisis. In May, Moynihan indicated the settlement would put the largest of the bank’s remaining crisis-era legal challenges behind it.