The deal with the bank would be the largest Justice Department settlement by far arising from the economic meltdown in which millions of Americans lost their homes to foreclosure. It would follow earlier multibillion-dollar agreements reached in the last year with Citigroup and JPMorgan Chase & Co.
The person, who spoke on condition of anonymity because the deal had not yet been announced, cautioned that some details still needed to be worked out and that it was possible the agreement could fall apart.
But the person said the two sides reached an agreement in principle following a conversation last week between Attorney General Eric Holder and Bank of America CEO Brian Moynihan.
The person said the tentative deal calls for the bank to pay roughly $9 billion in cash and for the remaining sum to go toward consumer relief.
A bank spokesman declined to comment.
The Wall Street Journal first reported details of the settlement on Wednesday.
The Justice Department last year reached a $13 billion settlement with JPMorgan, and last month announced a $7 billion settlement with Citigroup.
Each of these deals are designed to offer some financial relief to homeowners, yet the cash totals from some of America’s largest banks are not nearly enough to reverse the damages caused by the bursting of the housing bubble and the ensuing recession that began in late 2007.
Last week, in a separate case, the U.S. District Court in Manhattan rejected the claim that Bank of America should avoid penalties for pre-merger actions taken by Countrywide and issued nearly $1.3 billion in fines.
The decision says that Bank of America had assumed the legal liabilities of Countrywide after the merger.
A federal jury earlier found Countrywide and one of its former executives, Rebecca Mairone, liable for fraudulently selling troubled mortgages to Fannie Mae and Freddie Mac. Mairone was ordered to pay $1 million.
Millions of Americans lost their homes in foreclosures and found themselves jobless in the worst downturn since the 1930s. Even as the unemployment rate has clawed back to 6.2 percent from a peak of 10 percent, many people are no better off, as average household incomes after inflation are still lower than what they were seven years ago.
Consumer groups criticized past settlements for being soft on the banks, noting that top executives at these firms have yet to face criminal charges for the actions of their companies. Dennis Kelleher, president and CEO of the advocacy group Better Markets, called for transparency surrounding the deal, urging the Justice Department to make public information on investor losses, the names of any bank executives involved and details on bank profit.
The settlements all stem from the sale of toxic securities made up of subprime mortgages. Banks played down the risks of subprime mortgages when packaging and selling the securities to mutual funds, investment trusts and pensions, as well as other banks and investors.
The securities contained residential mortgages from borrowers who were unlikely to be able to repay their loans, yet were publicly promoted as relatively safe investments until the housing market collapsed and investors suffered billions of dollars in losses. Those losses triggered a financial crisis that pushed the economy into the worst recession since the 1930s.
Bank of America had previously argued that it shouldn’t be held liable for the subprime mortgages issued by Countrywide and Merrill Lynch, two troubled firms the bank acquired in 2008 as the meltdown took hold. Combined, those three firms issued $965 billion in mortgage-backed securities from 2004 to 2008, according to public records. Almost 75 percent of that total came from Countrywide.