By Lananh Nguyen and Manya Saini
(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.
“Ambac is very pleased to have reached this settlement with Bank of America,” Claude LeBlanc, Ambac’s chief executive officer, said in a statement. It had sought almost $3 billion in damages.
Ambac shares jumped almost 24% before the market open. It will record a gain of about $390 million from the settlement in its third and fourth quarter results.
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, according to the filing. The bank declined to comment further.
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 Nguyen in New York, Manya Saini and Mehnaz Yasmin in Bengaluru; Editing by Shinjini Ganguli, Chizu Nomiyama and Nick Zieminski)