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Brian Moynihan is hoping that the worst merger in Wall Street history is, well, history.
Almost exactly five years after former Bank of America CEO Ken Lewis scooped up tottering mortgage giant Countrywide Financial for $4 billion, Moynihan agreed to shell out another $13 billion — bringing the total tab to more than $47 billion — to put the disastrous deal behind the bank.
The Charlotte, NC, banking giant reached two separate settlements yesterday to resolve mortgage-related woes, including $11.7 billion to cover hundreds of billions in soured mortgages BofA sold to government-backed mortgage giant Fannie Mae.
BofA is also on the hook for $1 billion for its role in the “robo-signing” scandal. The bank is one of 10 firms that agreed to pay a combined $8.5 billion to the Federal Reserve and the Office of the Comptroller of the Currency to resolve foreclosure abuses.
Despite the enormous tab, BofA expressed relief that it finally is close to vanquishing the specter of Countrywide, which has saddled the bank with billions of dolllars in mortgage-related losses and liabilities.
“Together, these agreements are a significant step in resolving our remaining legacy mortgage issues,” Moynihan said in a statement yesterday.
BofA has set aside some $4 billion more to tackle ongoing disputes over mortgage securities problems with guarantor MBIA.
The bank is also waiting on a hearing in May that will determine whether an $8.5 billion settlement struck with private investors such as BlackRock and the Federal Reserve Bank of New York will stand.
Yesterday’s agreement comes on top of a $2.6 billion deal reached a year ago with Fannie and Freddie Mac, a smaller government-sponsored entity, or GSE. That deal didn’t address all of Fannie’s claims, creating friction between Fannie and BofA officials.
“Overall, the Fannie Mae settlement is a positive for BofA to get out from under this mortgage stuff,” said Chris Whalen, managing director at Carrington Investment Services.
Whalen said that while BofA still has a lot of “headline” risk, there could be an argument for the bank’s stock hitting $25 a share.
BofA shares, which closed down 2 cents yesterday at $12.09, have nearly doubled over the past year.
“This does put the GSE-stuff behind it,” Paul Miller, analyst at FBR Capital Markets, told Bloomberg News.
Moynihan, 53, has spent the past three years at the helm of BofA cleaning up his predecessor’s disastrous decision to buy Countrywide.
What was heralded as a bargain at the time turned out to be costly indeed.