Following a bonanza $17 billion settlement agreed by Bank of America Corp. this week, Nevada will receive exactly this much of it in cash: Zero.
But state officials say that doesn’t mean the Silver State will go home empty-handed.
“Nevada is not getting any separate funding for pension fund losses, but we should receive money to homeowners,” Nevada Attorney General Catherine Cortez Masto said Friday. “It’s unclear how much that would be.”
The settlement, announced Wednesday by the U.S. Justice Department, calls for the second-largest U.S. bank to pay a $9.65 billion cash penalty on charges that it misled investors into buying flimsy mortgage-backed securities, and provide $7 billion of relief to struggling homeowners and communities.
Nevada will not receive cash because its pension fund suffered zero losses, but states whose pension funds lost money will get cash settlements. States such as California, New York and Illinois will share a piece of the $16.65 billion settlement. Nearly $10 billion of that bonanza will arrive as cash.
Nevada will take a slice of that $7 billion in aid, which will arrive as consumer relief credits — to be put toward items such as principal reductions for certain types of Federal Housing Administration mortgages and “incentivized” loan modifications.
State officials are talking with Bank of America to work out the details of a deal.
“Nevada homeowners stand to benefit from the settlement via consumer relief that Bank of America is incentivized to provide to Nevada as a hardest-hit state in the form of loan modifications,” spokeswoman Jennifer Lopez said in the statement. “Our Home Again housing counselors will be working closely with Bank of America to use existing resources that were set up to maximize recovery under the 2012 National Mortgage Settlement to again maximize Nevada’s benefit under the latest national settlement announced yesterday.”
New York and California will both get $300 million in damages, while Illinois receives $200 million, Maryland gets $75 million, Delaware gets $45 million and Kentucky receives $23 million, according to the individual states’ attorneys general.
“One of the benefits of a resolution like this is that we can actually begin to compensate public pension funds that … were victims of this,” Associate U.S. Attorney General Tony West told Reuters.
All the states gaining cash have unfunded pension liabilities, according to the Pew Charitable Trusts, a think tank. California has obligations of $131 billion, New York has $21.5 billion, Illinois has $94.6 billion, Maryland has $20.9 billion, Delaware has $1 billion and Kentucky has $21.4 billion.
California, Illinois, Maryland and Kentucky said the damages would reimburse or go toward pension funds.
The settlement eclipses the respective $13 billion and $7 billion accords that JPMorgan Chase &Co. and Citigroup Inc. recently reached to resolve similar claims, but is dwarfed by a $25 billion settlement in 2012 among five of the U.S. biggest lenders and 49 states over mortgage malpractice.
Reuters contributed to this report. Contact reporter Ed Komenda at firstname.lastname@example.org or 702-383-0270. Follow him on Twitter @ejkomenda.