Four Witches of Settlements: Contingent Liabilities, Costs, Time & Juries

 "If you're a PLAINTIFF investor, you now know this is a potential lottery ticket, and the only way you lose is by not playing," said Matt McCormick, a portfolio manager at Cincinnati-based Bahl & Gaynor Investment Counsel.

Bank of America, the largest U.S. lender by assets, announced a deal to pay $8.5 billion to bondholders that said they were duped into investing in defective mortgages.

The deal will pave the way for investors holding mortgage-backed securities filled with now-toxic home loans to pursue claims against other large mortgage lenders such as Wells Fargo & Co and JPMorgan Chase & Co, analysts said.

A settlement, first reported by The Wall Street Journal, would be the largest in the banking industry to date. It would also require approval by Bank of America's board, which met on Tuesday to discuss it, according to the source.

After news of a possible settlement, shares rose as much as 3.5 percent.

The largest U.S. bank by assets has been fighting claims by a group of 22 investors over the housing-related securities it packaged and sold before the financial crisis.

This investor group includes BlackRock Inc., MetLife Inc. and the Federal Reserve Bank of New York, in a dispute dating back to the fall. It had threatened to take the matter to court, but both sides delayed a trial early this year to continue settlement negotiations.

Bank of America was not immediately available for comment. BlackRock declined to comment.

Bank of America's possible settlement extends beyond the case brought by the initial group of investors, and could resolve "significant parts" of its exposure to repurchase claims from private investors, the person familiar said.

Last Fall, Bank of America Chief Executive Brian Moynihan has said the bank would contest any repurchase claims, and described the process as "hand-to-hand combat."

But as the bank entered into settlement agreements with bond insurers and the two government-backed mortgage investment companies, Moynihan softened that stance, and said the bank would settle when fighting would offer little for shareholders.

Investment idea for sage leadership: Bank of America!!!