American International Group said it will get at least $650 million from Bank of America as part of a legal settlement involving toxic residential mortgage-backed securities.

With the settlement, yet another aspect of the 2008 global financial meltdown reaches resolution.

AIG said it is slated to receive the cash plus a “pro rata share” of whatever is paid out in the end to investors in connection with the settlement involving Bank of America and its Countrywide subsidiary.

According to AIG, the settlement, which it dubs “a global resolution,” covers claims pending in New York and California federal courts involving the creation, promotion and selling of residential mortgage-backed securities. AIG said those products inflected major losses on the bottom line of the conglomerate and its subsidiaries, either directly or through their involvement with AIG’s securities lending program.

AIG said the deal also addresses its objections concerning the $8.5 billion settlement of Countrywide’s mortgage repurchase obligations to various investors. Also, it covers any problems generated by AIG’s United Guaranty divisions when they issued mortgage guarantee insurance to both Bank of America and Countrywide.

There’s more to the deal. As AIG noted in its announcement, all involved parties said they’ll resolve outstanding mortgage guarantee claims disputes through previously established claims processes and payment formulas, subject to the approval of Fannie Mae, Freddie Mac and other mortgage holders.

Source: AIG