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Bank of America to pay $1.84B to Ambac Financial to resolve pending lawsuits
In a regulatory filing, Bank of America (BAC) disclosed that the corporation and certain wholly owned subsidiaries entered into an agreement with Ambac Assurance Corporation (AMBC) to resolve all pending Ambac lawsuits against the corporation and its subsidiaries previously disclosed in the corporation’s Annual Report on Form 10-K for the fiscal year ended 2021, and in prior U.S. Securities and Exchange Commission reports.
As disclosed in those filings, the pending lawsuits, with damages claims of more than $3B, were brought by Ambac against Countrywide entities and other legacy entities related to bond insurance policies that Ambac provided before the 2008 financial crisis.
Under the terms of the agreement, in exchange for the corporation’s payment of $1.84B to Ambac, Ambac, among other things, will cause all pending litigation between the parties to be dismissed with prejudice, and release the corporation and its subsidiaries from all outstanding claims related to Ambac’s issuance of bond insurance policies for certain of the corporation’s and legacy entities’ securitized pools of residential mortgage loans.
The corporation previously accrued for certain amounts of the settlement payment. As a result of the previous accruals and in consideration of the settlement payment, Bank of America said it expects to incur a pre-tax expense in the third quarter of 2022 of approximately $354M, or 3c per share on an after tax basis.
Ambac had been seeking to recover billions of dollars in claims it paid out on bonds originally underwritten by Countrywide Financial, which Bank of America acquired after the mortgage firm’s collapse during the financial crisis. BofA has already paid more than $50 billion to resolve regulatory probes and litigation stemming from its $4 billion purchase of Countrywide.
A trial was underway before Manhattan Supreme Court Justice Robert Reed and was expected to last months. The eventual final payment from Bank of America will resolve all legal matters, according to the filing.
Ambac shares are up 14% to $14.55.
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