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Settlement Brings 'Closure' For BofA, Hard Work Remains

Of that $25 billion mortgage and foreclosure fraud settlement agreed to yesterday by five of the nation's biggest lenders, Bank of America will pay the lion's share: nearly $12 billion. UNC Charlotte banking professor Tony Plath says the settlement means closure to the whole robo-signing debacle that got the attorneys general investigating Bank of America and other mortgage lenders back in 2010. "They're not gonna be tied up in court for the next 10 years fighting all of the 50 state attorneys general over properties against which they can't foreclose," says Plath. The closure comes at a cost: The settlement has Bank of America spending $7.6 billion to help struggling homeowners avoid foreclosure. That may mean lowering what some owe on their mortgages if their homes have lost value. Another $1 billion will go toward helping underwater homeowners refinance to lower rates. A few billion more will be spent in cash payments to people on whom Bank of America improperly foreclosed. All of which can't be good for a bank that reported a net income of barely $1 billion last year. "And now we know one of the reasons 2011 was so horrible - they had to get ready for this," says SNL Financial contributing editor Nancy Bush. Bank of America says it already accounted for the brunt of the settlement in last year's financial statements. However, the bank does expect to lose income as more customers are able to refinance their mortgages to lower rates. With the foreclosure settlement and a "horrible" 2011 behind it, Bush says Bank of America does seem to be out of "crisis mode." Consider the bank's stock: It's been steadily improving since mid-December when it dipped below $5. It's now up over $8. "Look, everybody who was going to sell (Bank of America stock), finally sold," says Bush. "You know, it's been a good recovery in the stock, but I'm not applauding." She says Bank of America faces a long slog. Just a year ago, the stock was trading near $15 just, and its other big bank competitors - including Wells Fargo - are currently going for more than $30 a share.