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BofA Agrees to Largest Shareholder Settlement of Subprime Meltdown

By: Carrie Bay

Bank of America has agreed to another hefty lawsuit settlement to smooth over charges brought against Countrywide, the subprime mortgage lender it acquired in July 2008.

On Monday, a U.S. district judge in Los Angeles approved BofA’s payout of $600 million to Countrywide investors who claim the lender wasn’t forthcoming with disclosures about its business of making low-quality, high-risk loans.

In addition, Countrywide’s third-party auditor, KPMG LLP, agreed to pay $24 million as part of the settlement, since it backed up the subprime lender’s alleged misleading financial statements at the time.

It’s the largest shareholder settlement awarded out of the subprime mortgage meltdown, and the latest in a myriad of legal wranglings BofA inherited with Countrywide’s troubled mortgage portfolio.

According to a report by the Los Angeles Times, the settlement doesn’t cover investments in mortgage-backed securities (MBS) sold by Countrywide.

It does, however, clear several former Countrywide executives, including CEO Angelo Mozilo, who were also named as defendants in the case.

Countrywide and Mozilo, though, are still under criminal investigation by the U.S. Justice Department and the California attorney general, and face civil investigations from the Securities and Exchange Commission (SEC) and a number of other state attorneys general.

BofA says Tuesday’s settlement is not a concession of any wrongdoing on the part of Countrywide, but was agreed to in order to avoid the cost of ongoing litigation