New York state will get $800 million as its share of a national $16.65 billion settlement with Bank of America over its role in the sale of mortgage-backed securities in the run-up to the financial crisis, New York Attorney General Eric Schneiderman said Thursday.
The nation's second largest bank has agreed to pay the state $300 million in cash and $500 million in the form of direct relief to consumers, including mortgage modifications, new loans, donations to communities and financing for affordable rental housing.
"This agreement sends a powerful message that we're going to hold financial institutions accountable for fraudulent behavior that they engaged in," said Schneiderman, a Democrat and the co-chairman of the state and federal working group that negotiated the settlement. "We're going to hold them accountable for their role in the devastating crash of 2008."
The deal is the largest reached so far over the mortgage meltdown, and the biggest the U.S. Justice Department has ever reached with a single entity.
The settlement also covers Bank of America subsidiaries Countrywide Financial Corp. and Merrill Lynch.
As part of the agreement, Bank of America acknowledges that it and its subsidiaries made "serious misrepresentations" to the public about mortgages and mortgage-backed securities, Schneiderman said. He said the bank also mischaracterized the quality of its loans to the federal government.
The securities "were full of underlying mortgage loans they knew, or should have known, would never be paid off. They had a series of processes that were shams," Schneiderman said.
Among the significant points of the settlement is $20 million going to local governments and land banks to cover distressed mortgages on as many as 300 abandoned properties, with $20,000 per property to help local governments either rehab them or tear them down.
New Yorkers also will receive loans so they can stay in their homes or get back into the housing market.
Another $125 million will go toward affordable rental housing, and $35 million will go to groups that provide legal, housing and community development programs.
New York City Mayor Bill de Blasio said in a statement the settlement will "make a real difference for families struggling across the city and state."