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BofA set to face the music with $17B settlement

Bank of America executives braced themselves Thursday morning for the public unveiling of a nearly $17 billion settlement with the Justice Department resulting from charges that the company misled investors about the quality and risk levels of mortgage-backed securities in the run-up to the financial crisis.

Executives spent the night reviewing the agreement's final details, in anticipation of issuing a news release discussing it before U.S. stock markets opened, said a source familiar with the matter. Separately, officials from the Justice Department scheduled a news conference in Washington to discuss the Bank of America agreement for 9 a.m. EDT.

BofA's long-anticipated settlement, which helps to resolve the majority of the bank's still-outstanding legal issues stemming from the mortgage crisis, is expected to consist of a cash penalty of about $9.6 billion, which will likely not be tax deductible, and a package of consumer-relief measures valued at $7 billion, said two people familiar with its details.

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The latter portion of the settlement, much of which may be deductible, will take the form of loan modifications and other measures intended to help troubled homeowners, these people added.

A man uses an ATM at a Bank of America branch on April 16, 2014 in New York City.
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A man uses an ATM at a Bank of America branch on April 16, 2014 in New York City.

As part of the settlement, BofA will also acknowledge a statement of facts by the government that outline the wrongdoing committed by the firm or its subsidiaries—notably the former Countrywide Financial and Merrill Lynch, both of which the bank bought in 2008—in the packaging or selling of mortgage-backed securities.

The anticipated BofA settlement will be the Justice Department's largest ever. At $16.6 billion, it is substantially larger than a similarly structured settlement reached with JPMorgan Chase last year for $13 billion, and dwarfs a recent $7 billion agreement with Citigroup.

Other past Justice Department settlements of significant size include a $4.5 billion accord reached in 2012 with the oil company BP over the Deepwater Horizon disaster and a $3 billion pact earlier that year with GlaxoSmithKline over illegal drug promotions and other transgressions.

All of those major settlements were reached under Attorney General Eric Holder.

—By CNBC's Kate Kelly

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