New York • Bank of America's $8.5 billion settlement with investors announced Wednesday is the largest any bank has ever paid.

It might help assuage worries about how deep the bank's mortgage problems will be and how long it might take to settle them. But for the nation's largest bank and its CEO Brian Moynihan, the slate is far from clean.

The payout Wednesday settles claims by just 22 investors who said Bank of America Corp. sold bonds based on substandard home mortgages. The bonds fell in value when the housing market collapsed and left the investors with losses on $424 billion worth of mortgages. The $8.5 billion settlement eclipses the past three years of earnings at the bank.

The uncertainty about just how bad BofA's mortgage issues might be has scared investors and led to a 31 percent decline in Bank of America's stock price since January of last year, when Moynihan took over.

"This is a major step forward for our company," Moynihan said in a conference call with investors on Wednesday.

Wall Street cheered the move, sending the stock up 3 percent, to $11.14. It has been one of the worst-performing stocks in the S&P 500 index in the past year.

But that rally could be short-lived. Analysts say the $8.5 billion is double the amount they'd expected. The bank continues to fight other investor groups that are demanding similar settlements. Lawsuits from the Federal Home Loan Bank of Boston, bond insurers MBIA and Syncora Holdings linger. The 50-state attorneys general investigation into poor foreclosure practices continues. And Bank of America is likely to be ordered to pay a hefty portion of the estimated $20 billion multibank settlement over the mishandling of hundreds of thousands of home foreclosures.

Paul Miller, a bank analyst at FBR Capital Markets, says he's concerned about the bank's ability to increase earnings at a pace that would make up for these higher costs. These worries are magnified by the fact that the economic recovery in the U.S. is slowing. That could reduce the number of loans the bank is able to make to consumers and businesses.

As a result of Wednesday's settlement and other mortgage-related costs, Bank of America said it will take a $14 billion charge in the second quarter and will report a net loss of $8.6 billion to $9.1 billion in the second quarter of 2011. That's up to 93 cents per share. The bank reports second-quarter results on July 19.

Bank of America is in worse shape than other major banks such as JPMorgan Chase & Co. and Wells Fargo & Co. because of its purchase of Countrywide for $4 billion in 2008. What seemed like a bargain price for the country's largest mortgage lender has cost the bank tens of billions more in mortgage losses, regulatory fines, repurchases of poorly written loans and expensive litigation. At the same time, Bank of America had written a fair amount of bad mortgages on its own. As it stands, the bank services one out of every five U.S. mortgages.

The other banks also don't have the same pressure to put the mortgage woes behind them. In March, the Federal Reserve didn't allow Bank of America to increase its dividend, citing uncertainty about the depth of its mortgage problems. It was the only denial issued to any of the four largest U.S. banks. And it raised questions over whether the bank was strong enough to withstand another economic downturn.

The combined effect of the losses and the uncertainty prompted a reversal in the bank's longtime strategy of fighting claims from investors, Moynihan admits. Since the beginning of the year, the bank has struck large settlements with multiple investors totaling $12.7 billion.

Most of the settlements are with investors who had purchased mortgages or mortgage-backed securities. They want banks to buy back mortgages that had misinformation about qualifications of borrowers who received them. During the housing boom, lenders such as Countrywide routinely gave mortgages to people without documenting their income or ability to pay. This was a key driver of the financial crisis.

Bank of America's chief financial officer Bruce Thompson said in a conference call with analysts that by the end of the second quarter, the bank would place $20 billion in reserves to cover costs related to future litigation and investor demands. —

In Utah

Bank of America is facing a possible lawsuit by the Utah Attorney General's Office for using its unit, ReconTrust Co., to allegedly foreclose on homeowners in violation of state law. A separate but similar lawsuit already is under appeal in federal court.