US banks have agreed to pay out over US$ 20 bn in two settlements.

It's been five years since the subprime mortgage crisis broke out in the US. But the ghosts of the crisis still continue to haunt the American finance industry. In a bid to resolve claims arising from the mortgage crisis, some major US banks have agreed to pay out over US$ 20 bn in two settlements. In one settlement, Bank of America has agreed to pay US$ 11.6 bn to government-controlled mortgage company Fannie Mae. In another settlement, 10 mortgage lenders have agreed to pay over U$ 8.5 bn. This has been done to settle regulators' allegations that these lenders were guilty of abusing the foreclosure system wherein the banks could seize homes from defaulting borrowers.

The compensation for the bad loans is likely to wipe out most of Bank of America's earnings for a second quarter in a row. It must be noted that prior to these two settlements, banks have already paid out billions of dollars as fines and compensation for slack lending standards