Talks between Bank of America (BAC) and the Justice Department over a potential multibillion-dollar settlement deal have reportedly stalled, with the impasse centered on how much the bank should pay to settle mortgage-related litigation.
A potential settlement deal stalled on Monday after Bank of America’s latest offer of more than $12 billion to resolve state and federal litigation into its sale of mortgage investments that later imploded was deemed too low, according to a report by The New York Times. That publication, citing people familiar with the matter, said the Justice Department had sought a settlement of more than $17 billion, which would be the largest payout of any bank to date.
Bank of America spokesman Lawrence Grayson declined to comment on the report. A Justice Department representative wasn’t immediately available to comment on the report.
Bank of America, the second-largest U.S. Bank by assets, in late March had said it has had preliminary discussions about a potential resolution of civil litigation brought by the Justice Department and other government authorities regarding the company’s residential mortgage-backed securities and other mortgage-related matters. Decisions made during the financial crisis to buy troubled securities firm Merrill Lynch and Countrywide Financial, once one of the largest subprime mortgage lenders, have led Bank of America to set aside billions in litigation costs, reserves and payouts.
The potential deal with the Justice Department is reportedly stalled because of a dispute over mortgage securities sold by Merrill Lynch, the New York Times reported. Bank of America agreed to buy Merrill for about $50 billion late in 2008 during the depths of the financial crisis. The bank has since said it felt pressured by the federal government to go through with that deal.
In late March, Bank of America agreed to pay $9.5 billion to resolve litigation by The Federal Housing Finance Authority over mortgage securities sold to Fannie Mae and Freddie Mac. That case began in 2011 when the federal regulator sued Bank of America and other financial institutions over mortgage-banked securities.