Bank of America has agreed to pay $335 million to settle a lawsuit claiming it misled shareholders about risky mortgages and its dependence on the electronic mortgage registry known as MERS.
B of A has enough reserved to cover the settlement cost, the company said in its 10-Q, filed on Friday. B of A only briefly referred to the settlement and said that it's subject to final documentation and federal court approval.
Institutional investors, including the Pennsylvania Public School Employees' Retirement System, accused the Charlotte, N.C., bank in a 2011 lawsuit of misleading them into buying the company's stock in 2009 and 2010. The shareholders said their stock purchases were used to repay $45 billion of Troubled Asset Relief Program funds.
The investors also alleged B of A knew it couldn't raise adequate capital to repurchase billions of dollars in securities that used Countrywide Financial-originated loans as collateral.
The plaintiffs also claimed that B of A knew that Merscorp's Mortgage Electronic Registration System, known as MERS, was faulty and that the bank would not be able rely on MERS to legally foreclose on thousands of delinquent borrowers.
(MERS was created in 1995 as a private loan registry allowing mortgage lenders to avoid paying county recorder fees. It later became a lightning rod for foreclosure litigation.)
The MERS lawsuit had been one of the longest-running cases filed against B of A that had not been settled. Brian Moynihan, chairman and chief executive, has overseen nearly $70 billion in settlements of cases involving mortgage bonds, overdrafts, fair lending issues and other problems. Most of the issues stemmed from former CEO Ken Lewis' ill-fated acquisitions of Countrywide Financial and Merrill Lynch.