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Mortgage Settlement Just the Start of Trouble for Bank of America (NYSE: BAC) and Friends

The biggest U.S. mortgage lenders, including Bank of America Corp. (NYSE: BAC), finally reached a $25 billion mortgage settlement to help homeowners - but the banks still face years of legal battles and billions of dollars in costs.

The provisions to the mortgage settlement include:

  • $5 billion total in cash penalties, payable to borrowers, states, and the federal government.
  • $20 billion in additional aid, through reducing homeowners' loan balances, and refinancing for underwater homeowners who are current on their loans.
Bank of America will pay an additional $1 billion to settle claims that it inflated appraisal prices from 2003-2009.

The multi-billion dollar mortgage settlement ends state and federal investigations into improper foreclosure procedures (like robo-signing), but banks can still get hit with criminal enforcement actions due to lending practices and mortgage-related securities.

"It's a big check with narrow immunity," Paul Miller, an analyst with FBR Capital Markets and a former Federal Reserve examiner, told Bloomberg News. "You get the state attorneys general off your back, but you're not getting immunity from securitizations, which could come with their own steep cost down the road."

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