On August 21, 2014, the Department of Justice announced that it as reached a $16.65 billion settlement with Bank of America Corporation – the largest civil settlement with a single entity in American history — to resolve federal and state claims against Bank of America and its former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch. The Justice Department and the bank settled several of the department’s ongoing civil investigations related to the packaging, marketing, sale, arrangement, structuring and issuance of Residential Mortgage-Backed Securities (RMBS), collateralized debt obligations (CDOs), and the bank’s practices concerning the underwriting and origination of mortgage loans.
The Bank of America will provide $7 billion of its settlement with the Department of Justice in the form of relief to aid hundreds of thousands of consumers harmed by the financial crisis precipitated by the unlawful conduct of Bank of America, Merrill Lynch and Countrywide. That relief will take various forms, including principal reduction loan modifications that result in numerous homeowners no longer being underwater on their mortgages and finally having substantial equity in their homes. It will also include new loans to credit worthy borrowers struggling to get a loan, donations to assist communities in recovering from the financial crisis, and financing for affordable rental housing. Finally, Bank of America has agreed to place over $490 million in a tax relief fund to be used to help defray some of the tax liability that will be incurred by consumers receiving certain types of relief if Congress fails to extend the tax relief coverage of the Mortgage Forgiveness Debt Relief Act of 2007.
The settlement provides for Consumer Relief, incuding Community Reinvestment and Neighborhood Stabilization. Under this category, Bank of America agrees to provide:
- Donations to state-based Interest on Lawyers’ Trust Account (IOLTA) organizations (or other statewide bar-association affiliated intermediaries) that provide funds to legal aid organizations, to be used for foreclosure prevention legal assistance and community redevelopment legal assistance (Minimum of $30 million).
- Donations to HUD-approved housing counseling agencies to provide foreclosure prevention assistance and other housing counseling activities (Minimum of $20 million).
In addition, an independent monitor will be appointed to determine whether Bank of America is satisfying its obligations. If Bank of America fails to live up to its agreement by Aug. 31, 2018, it must pay liquidated damages in the amount of the shortfall to organizations that will use the funds for state-based Interest on Lawyers’ Trust Account (IOLTA) organizations and NeighborWorks America, a non-profit organization and leader in providing affordable housing and facilitating community development. The organizations will use the funds for foreclosure prevention and community redevelopment, legal assistance, housing counseling and neighborhood stabilization.
Funding Title: Bank of America Settlement for Financial Fraud
Agency Name: Bank of America
Funding Instrument Type: Grant
Express Language for Legal Aid: Yes
Target Population: Consumers harmed by the unlawful conduct of Bank of America, consumers of mortgages, consumers receiving certain types of relief with tax liabilities, and potential borrowers of loans
Cost Sharing or Matching Requirement: No
How to Apply: Bank of America shall provide consumer relief as to remediate harms resulting from the alleged unlawful conduct of Bank of America.
Estimated Total Program Funding: $7,000,000,000.00 for consumer relief, $490,160,000.00 for payment of consumer tax liability
Eligible Applicants: Interest on Lawyers’ Trust Account (IOLTA) organizations , HUD-appraoved housing counseling agencies and NeighborWorks America.
To the extent practicable, “state-based” IOLTA organizations includes those in the 50 states, the District of Columbia, and all U.S. territories or possessions. A minimum amount of $200,000 will be provided to the IOLTA or other eligible organization in each jurisdiction, with all remaining donation funds under this Menu Item 3.F to be distributed pro rata among all jurisdictions based on poverty population data, in the manner employed for funding distribution by the Legal Services Corporation based on data collected by the U.S. Census Bureau.
Policy and Regulations on Use of Funding:
Link to Full Announcement: http://www.justice.gov/opa/pr/2014/August/14-ag-884.html
Contact Information: Residential Mortgage-Backed Securities (RMBS) Working Group, http://www.stopfraud.gov/index.html
Categories: Consumer, Department of Justice, Express Language for Legal Aid, Housing, Non-profit Organizations, Settlements, Victims of Crime
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