Thursday, July 31, 2014 9:11:26 AM
By SYDNEY EMBER
JULY 31, 2014
Bank of America and federal prosecutors have accelerated their negotiations to resolve an investigation into the bank’s sale of troubled mortgage securities before the financial crisis, Michael Corkery and Ben Protess write in DealBook. But the two sides remain far apart on crucial issues, and a settlement remained elusive late on Wednesday, even after the bank raised its offer.
The bank’s lawyers and Justice Department prosecutors are said to have met in Washington on Wednesday to discuss the size of a potential cash penalty. Heading into the meeting, the Justice Department was demanding roughly $17 billion to settle the case, more than $10 billion in the form of a cash penalty and the rest in so-called soft dollar payments to help struggling homeowners. The bank was offering a total of $13 billion, including $4 billion in cash. The bank raised its cash offer to about $7 billion and its total proposal to roughly $14 billion, but the Justice Department has balked at the offer. If a deal is not reached in the coming days, the Justice Department might announce a lawsuit against the bank.
Also on Wednesday, Judge Jed S. Rakoff of the Federal District Court in Manhattan ordered Bank of America to pay a penalty of nearly $1.3 billion, nine months after federal prosecutors persuaded a jury to find Bank of America liable for selling questionable loans to Fannie Mae and Freddie Mac, the government-controlled mortgage finance giants, before the financial crisis. The case exposed fraudulent practices in one of Countrywide’s lending programs nicknamed the hustle, which linked bonuses to how fast bankers could originate loans.
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