Bank of America Corp.’s share price up, approaches a record $16 billion to $17 billion settlement with the US DoJ

A person with knowledge of the process reported that Bank of America Corp. is approaching a record settlement of $16 billion to $17 billion with the U.S. Justice Department. The agreement is to put an end to the probes into mortgage-backed bonds sales between 2004 and 2008, which amounted to $965 billion.

According to the person familiar with the situation, who asked not to be identified because the talks are still not public, the bank would pay about $9 billion in cash to the federal government, states and other government entities. This part of the agreement could be finalized until the end of August.

The rest of the sum is to be paid by the bank in consumer relief – about $7 billion. The person said that the U.S. Justice Department and the bank are also negotiating over some details of the proposed settlement.

If the agreement is sealed, this would be the largest one made by the Department of Justice, exceeding the $13-billion agreement with JPMorgan Chase in 2013. The banks have paid over $50 billion to settle probes so far. Including the settlement, which was sealed with the Federal Housing Finance Agency over similar mortgage issues, Bank of Americas total government-related legal tab could reach $23 billion.

As reported by the person close to the process, Attorney General Eric Holder and the Chief Executive Officer of Bank of America Mr. Brian T. Moynihan have managed to reach the outlines of the settlement last week after a phone call. Yesterday there was a meeting of the official representatives of the two parties, including the Associate Attorney General Tony West and bank officials.

One of the spokesmen of Bank of America – Mr. Lawrence Grayson refused to make any comments on the situation, and so did the official representative of the U.S. Department of Justice – Mr. Brian Fallon.

Bank of America Corp. was 1.33% up to close at $15.20 per share yesterday, marking a one-year change of +3.83%. According to the information published on CNN Money, the 29 analysts offering 12-month price forecasts for Bank of America Corp. have a median target of $18.00, with a high estimate of $22.00 and a low estimate of $13.00. The median estimate represents a +18.42% increase from the last price of $15.20.