Oct 7 (Reuters) –
Bank of America agreed to pay bond insurer Ambac Financial Group $1.84 billion, the bank said in a filing Friday, bringing to a close the last of the lender’s major lawsuits stemming from the 2008 mortgage crash.
The settlement concludes the Charlotte, North Carolina-based lender’s protracted legal battle over its ill-fated purchase of Countrywide, which was once the largest U.S. mortgage lender, during the financial crisis.
Shares of Ambac, which had sought almost $3 billion in damages, rose 23% before the market open.
Bank of America stock was up 0.5% in premarket trading. The second-largest U.S. lender will incur a $354 million expense for the settlement when it reports third quarter earnings on Oct. 17 after setting aside funds earlier to prepare for the payment.
Between 2004 and 2006, Ambac insured securities backed by Countrywide loans worth $25 billion. The insurer claimed 80% of the loans were the product of poor underwriting standards or had other deficiencies that violated insurance agreements, and that Bank of America failed to repurchase the loans as required.
Ambac sought to recoup billions in insurance claims it paid to cover investor losses on securities backed by 375,000 home loans from Countrywide.
Bank of America spent years cleaning up the impact from the 2008 crisis. It repaid a $45 billion bailout by taxpayers and was slapped with more than $76 billion in fines in the decade after. (Reporting by Lananh Nguye in New York, Manya Saini and Mehnaz Yasmin in Bengaluru; Editing by Shinjini Ganguli and Chizu Nomiyama)