Bank of America has agreed to pay $8.5bn (£5.3bn) to settle claims that the lender sold poor-quality mortgage-backed securities that went sour when the housing market collapsed.
A group of 22 investors, including the Federal Reserve Bank of New York, Pimco, and Blackrock, had demanded that the bank repurchase $47bbn in mortgages that its Countrywide unit sold to them in the form of bonds.
They argued that Countrywide has enriched itself at the expense of investors by continuing to service bad loans while running up servicing fees.
Brian Moynihan, chief executive of BoA, said in a statement: "This is another important step we are taking in the interest of our shareholders to minimize the impact of future economic uncertainty and put legacy issues behind us."
BoA bought Countrywide in 2008 for $4bn.
Shares in bank rallied as the settlement removed a question mark that has overshadowed the company.
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