Bank of America to pay $16.65 billion in mortgage fraud case

Photo courtesy CNN

NEW YORK (CNNMoney) -- Bank of America has agreed to pay $16.65 billion in what would be the biggest mortgage securities fraud settlement.

The agreement announced Thursday settles a probe by the Justice Department and six states related to banking practices dating to the financial crisis.

The government accused the bank of misleading the buyers of mortgage-backed securities about the quality of the loans. The bank admitted responsibility, but the announcement did not include criminal charges.

The settlement includes almost $10 billion in various penalties and civil suit claims, with the rest earmarked for homeowner relief.

It's a large sum, even for the large bank: it made just over $17 billion in profit from 2011 to 2013 -- and about $2 billion more in the past six months.

"We believe this settlement, which resolves significant remaining mortgage-related exposures, is in the best interests of our shareholders, and allows us to continue to focus on the future," said Bank of America CEO Brian Moynihan in a statement.

Attorney General Eric Holder and Moynihan reached the main terms of the agreement in a telephone call in late July.

To move along the negotiations, the Justice Department had threatened to file a lawsuit against the bank. Paul Fishman, the U.S. Attorney in New Jersey, has led a civil probe of the mortgage business of Merrill Lynch, which Bank of America acquired in 2009.

Bank of America assumed Merrill's obligations in the merger but recently argued it shouldn't have to pay for shoddy practices before it became a unit of BofA.

The settlement comes after the bank agreed to pay $6.3 billion to settle four mortgage-related suits filed by the Federal Housing Finance Authority. The FHFA has overseen Fannie Mae (FNMA) and Freddie Mac (FMCC), the government-backed housing finance firms.

The deal would eclipse the $13 billion settlement stemming from a similar probe by the Justice Department and states against JPMorgan Chase last year.