Charlotte-based Bank of America has settled two financial crisis-era lawsuits over who should pay for the multi-billion dollar fraud at disgraced lender Taylor Bean & Whitaker Mortgage, whose founder is currently serving a 30-year prison sentence in North Carolina.
The Wall Street Journal reported Thursday that the two lawsuits came from Deutsche Bank and BNP Paribas, whose mortgage units both invested in notes issued by Taylor Bean’s Ocala Funding unit, a mortgage conduit. Bank of America acted as the intermediary between the investors and Ocala, and was sued for $1.75 billion in 2009 when the notes soured.
Terms of the agreement were not disclosed, the Journal reported.
Taylor Bean, which went bankrupt in 2009, was once the country’s largest mortgage lender not owned by a bank, and prosecutors have called the Ocala fraud one of the biggest bank frauds in U.S. history.
Taylor Bean created Ocala in 2005 to purchase home loans, which it bundled into securities and sold to investors. It was part of a seven-year fraud orchestrated by Florida businessman Lee Farkas, who is serving a prison sentence in Butner in Granville County, just north of Raleigh. The fraud also resulted in the collapse of the firm’s main lender, Alabama-based Colonial Bank.
When Taylor Bean’s mortgage assembly line collapsed in the summer of 2009, banks, investors and the Federal Deposit Insurance Corp. all denied responsibility, and Bank of America and the FDIC sued one another, the Journal reported.
As the receiver for 26 failed banks including Colonial, Bank of America agreed to pay $1.03 billion to the FDIC as part of its settlement with the Justice Department.