Bank of America Corp.’s share price up, faces a record $17bn settlement with the US Department of Justice

According to people with knowledge of the matter, Bank of America will soon announce it has agreed to a $17 billion settlement with the U.S. Department of Justice over the banks mortgage securities debacle.

The agreement is to put an end to the investigation against Bank of America. The bank was accused of misleading buyers over the quality of its mortgage-backed securities, as the loans turned out to be faulty. Most of the loans in question were sold by Countrywide Financial and Merrill Lynch before Bank of America bought them in the wake of the 2008 financial crisis.

The record settlement, which is expected to be officially announced as soon as Thursday, would be the largest ever reached between the US and a single company, and would equal the banks profit for the past five years.

According to some officials with direct knowledge of the matter, who asked not to be identified, because the settlement is not official yet, Bank of America is to pay $9.65 billion in cash in addition to the $7 billion of consumer aid.

When negotiating with the U.S. Department of Justice, the lawyers of Bank of America claimed that the bank was unreasonably punished for the actions of Merrill and Countrywide, which were responsible for issuing most of the questionable mortgages.

U.S. prosecutors are also preparing a civil lawsuit against the co-founder of Countrywide Financial – Mr. Angelo Mozilo. According to a person close to the case, the prosecutors also intend to press charges against several other ex executives of Countrywide.

The record settlement was talked about for some time, and follows a string of fines on banks in the US, as officials crackdown on the problems that caused the 2008 crisis.

Bank of America Corp. was 0.54% up to close at $15.52 per share yesterday, marking a one-year change of +8.61% and valuing the company at $163.21bn. Premarket trade today added 0.39% by 8:19 GMT. According to CNN Money, 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 +15.98% increase from the last price of $15.52.