By Evan Perez @CNNMoneyAugust 20, 2014: 5:41 PM ET
NEW YORK (CNNMoney)
Bank of America is on the verge of finalizing a deal with the government to pay more than $16.5 billion in what would be the biggest mortgage securities fraud settlement.
The agreement, to be announced as soon as Thursday, would settle a probe by the Justice Department and a group of states related to banking practices dating to the financial crisis, according to a person familiar with the deal.
The government accused the bank of misleading the buyers of mortgage-backed securities about the quality of the loans.
The settlement includes payments by the bank for penalties as well as relief for homeowners.
It's a large sum, even for the large bank: it made just over $17 billion in profits from 2011 to 2013 -- and about $2 billion more in the past six months.
Bank of America representatives declined to comment Wednesday.
Attorney General Eric Holder and Bank of America(BAC) CEO Brian Moynihan reached the main terms of the agreement in a telephone call in late July.
To move along the negotiations, the Justice Department had threatened to file a lawsuit against the bank. Paul Fishman, the U.S. Attorney in New Jersey, has led a civil probe of the mortgage business of Merrill Lynch, which Bank of America acquired in 2009.
Bank of America nears mortgage settlement
Bank of America assumed Merrill's obligations in the merger but recently argued it shouldn't have to pay for shoddy practices before it became a unit of BofA.
The settlement comes after the bank agreed to pay $6.3 billion to settle four mortgage-related suits filed by the Federal Housing Finance Authority. The FHFA has overseen Fannie Mae (FNMA)and Freddie Mac(FMCC), the government-backed housing finance firms.
The deal would eclipse the $13 billion settlement stemming from a similar probe by the Justice Department and states against JP Morgan(JPM) last year.
--CNNMoney's Melvin Backman contributed to this report.