Bank of America’s troubles with residential mortgage-backed securities are not over yet. According to the bank’s quarterly filing with the Securities and Exchange Commission, the bank has agreed to pay 335 million dollars to settle a federal lawsuit that claims the bank misled shareholders as to the quality of certain mortgage-backed securities sold to investors immediately following the crisis. The agreement is subject to final documentation and court approval.
Shareholders of the Pennsylvania Public School Employees’ Retirement System claimed in the suit that Bank of America misled them into buying stock in 2009 and 2010, some of which the bank sold to repay a 45 billion dollar bailout. The plaintiffs also claimed that the bank knew it could not raise enough capital to buy back billions of dollars worth of securities backed by risky residential mortgage loans. Many of the risky loans were issued by Countrywide, one of the nation’s largest subprime lenders which Bank of America acquired in 2008.
The U.S. House of Representatives has postponed voting on a bill that will limit the salaries of Fannie Mae and Freddie Mac CEOs due to a hefty lineup of other legislation. The vote was originally scheduled to take place last week. The Equity in Government Compensation Act of 2015 would cap the salaries of Fannie Mae CEO Timothy Mayopoulos and Freddie Mac CEO Donald Layton at 600 thousand dollars a year instead of 4 million dollars a year, the salary proposed by FHFA Director Mel Watt. The vote will likely take place later in November. A similar bill passed unanimously in the U.S. Senate in September.