American International Group (AIG) has reached a global resolution of its residential mortgage related disputes with Bank of America (BofA) in lieu of $650m cash compensation.
Under the terms of the settelment, AIG will also receive its pro rata share of the amount that will be paid out to investors in connection with the Countrywide repurchase settlement.
The resolution also covers AIG’s objections to the $8.5bn settlement of Countrywide’s mortgage repurchase obligations to various investors, as well as disputes pertaining to the issuance of mortgage guaranty insurance by AIG’s United Guaranty subsidiaries to BofA and Countrywide.
AIG filed the case against BofA accusing the US lender for selling defective mortgage-backed securities in the run-up to the financial crisis of 2008, which caused billions of dollars in losses. AIG had originally demanded $10bn in compensation in the case.
Furthermore, both parties have agreed to resolve the outstanding mortgage guaranty claims disputes in accordance with agreed-to claims processes and payment formulae, which is subject to the approval of Fannie Mae, Freddie Mac and certain other mortgage holders.
Commenting on the settelment, AIG president and CEO Robert Benmosche said: "We are very pleased to have this matter resolved.
"Today’s settlement is a just resolution that’s in the best interest of our various stakeholders."
Serving customers in more than 130 nations and regions, AIG offers property-casualty, as well as life insurance and retirement insurance products and services.
Image: AIG Building on 175 Water Street, New York City. Photo: courtesy of AIG.