CHARLOTTE, N.C./NEW YORK |
(Reuters) - Bank of America Corp is close to a dealto pay $8.5 billion to settle claims from a group of powerful investors that lost money on mortgage-backed securities, a person familiar with the matter said on Tuesday.
The deal could embolden investors holding mortgage-backed securities filled with now-toxic home loans to pursue claims against other large mortgage lenders such as Wells Fargo & Co and JPMorgan Chase & Co, analysts said.
A settlement, first reported by The Wall Street Journal, would be the largest in the banking industry to date. It would also require approval by Bank of America's board, which met on Tuesday to discuss it, according to the source.
"If you're an investor, you now know this is a potential lottery ticket, and the only way you lose is by not playing," said Matt McCormick, a portfolio manager at Cincinnati-based Bahl & Gaynor Investment Counsel. "You have to think this is the first settlement we'll be seeing in a long line."
After news of a possible settlement, shares rose as much as 3.5 percent from their $10.82 close but later eased to trade around $10.95 after-hours, up about 1 percent.
The largest U.S. bank by assets has been fighting claims by a group of 22 investors over the housing-related securities it packaged and sold before the financial crisis.