WASHINGTON — The Justice Department on Thursday announced a $16.65 billion settlement with Bank of America Corp. over its role in the sale of mortgage-backed securities in the run-up to the financial crisis.
The deal calls for the bank, the second-largest in the United States, to pay a $5 billion cash penalty, another $4.6 billion in remediation payments, and provide about $7 billion in relief to struggling homeowners.
The settlement is by far the largest deal the Justice Department has reached with a bank over the 2008 mortgage meltdown. In the last year, JPMorgan Chase & Co. agreed to a $13 billion settlement while Citigroup reached a separate $7 billion deal.
The settlement requires the bank to reduce some homeowners’ loan balances, provide new loans to low-income buyers, and address areas of neighborhood blight.
But consumer advocates say few people will be helped relative to the devastation triggered by the mortgage bonds, which fueled the worst financial crisis since the 1930s and threw millions of homes into foreclosure.
Only a fraction of homeowners would be eligible for refinancing under the settlement. And the process by which people would qualify and receive aid could drag on for years, with payouts set to be completed as late as 2018.
Those who have already lost homes to a foreclosure or a short sale wouldn’t likely benefit at all.
“For the millions who lost their homes, it reinforces the appearance that the government has not been on their side,” said Bruce Marks, chief executive of the nonprofit Neighborhood Assistance Corporation of America.