Bank of America Corp. has agreed to pay $335 million for misleading shareholders about its exposure to risky mortgage securities and its dependence on an electronic mortgage registry known as MERS. The settlement was reached in federal court.
The company disclosed the $355 million settlement during its SEC filing for quarterly earnings on Friday. The company set aside enough reserves for the settlement as of June 30.
Final court approval is still required for the deal to be passed.
Shareholders led by the Pennsylvania Public School Employees’ Retirement System claimed they had been misled into buying Bank of America stock in 2009 and 2010, including stock sold to repay $45 billion of federal bailout money.
Shareholders also said the bank knew that record keeping in Merscorp Inc’s private Mortgage Electronic Registration Systems registry was so poor that it would not be able to legally foreclose on thousands of delinquent mortgages.
MERS was established in 1995. It was meant to simplify the process of transferring ownership of mortgages and recording changes with county clerks.
Bank of America has spent more than $70 billion since the financial crisis to resolve legal and regulatory matters.
The full case can be reviewed under Pennsylvania Public School Employees’ Retirement System et al v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 11-00733.