Bank of America Corp (BAC): Bank Reaches Important Legal Settlement

Shares of the nation’s second largest bank by assets, Bank of America Corp (NYSE:BAC), are trading higher today after the lending giant came to an agreement with the federal regulator of credit unions. Under the terms of the deal, Bank of America Corp (NYSE:BAC) will pay $165 million to settle allegations that it “downplayed risks of poor-quality mortgages packaged into securities” that were then sold to credit unions around the country.

According to prepared remarks issued this morning by the National Credit Union Administration, “As a result of the Bank of America Corp (NYSE:BAC) settlement, NCUA has now successfully recovered more than a third of a billion dollars on behalf of credit unions. These settlements and our ongoing lawsuits further NCUA’s goal of minimizing the losses of the corporate crisis and cutting future costs to credit unions.”

As the remarks intimate, Bank of America Corp (NYSE:BAC) joins a growing list of institutions that have come to terms with the NCUA. In November of 2011, Deutsche Bank AG (USA) (NYSE:DB) and Citigroup Inc (NYSE:C) agreed to pay a combined and eerily similar $165.5 million to settle analogous claims — for the NCUA press releases see here and here, respectively (links may open PDFs). And in March of last year, London-based HSBC Holdings plc (ADR) did the same. In addition, as The Wall Street Journal noted, the NCUA still has outstanding suits against JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group, Inc. (NYSE:GS) , among others.

For Bank of America Corp (NYSE:BAC) specifically, this marks a small but important victory on its journey to put past transgressions behind it — primarily those of Countrywide Financial, which the bank acquired at the beginning of 2008. As I discussed at length in this series on Bank of America’s legal liabilities, while it’s already paid out tens of billions of dollars to atone for Countrywide’s sins, considerable obstacles remain ahead.

That aside, this agreement helps to clear up yet another unknown liability that’s been holding down shares of the bank. At the beginning of this year, Bank of America Corp (NYSE:BAC) acknowledged that it had come to a preliminarily agreement on the settlement amount with the NCUA. But beyond the fact that the amount wasn’t disclosed at the time, it was also “subject to the negotiation and execution of mutually agreeable settlement documentation and approval by the NCUA board.” Suffice it to say, the news today puts any questions to rest.

The article Bank of America Reaches Important Legal Settlement originally appeared on Fool.com.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Goldman Sachs. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase.

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