The whopping charge represents the banking industry’s biggest single settlement tied to the subprime mortgage boom and the subsequent financial crisis of 2008.

Of the $14 billion, $8.5 billion will go to help settle claims by heavyweight holders of the securities, including Pimco, BlackRock and the Federal Reserve Bank of New York, that have been pressing for a settlement since last fall.

The losses stem largely from mortgages underwritten by Countrywide Financial, the subprime mortgage lender that Bank of America bought in 2008.

“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,” Brian T. Moynihan, the bank’s chief executive, said in a statement. “We will continue to act aggressively, and in the best interest of our shareholders, to clean up the mortgage issues largely stemming from our purchase of Countrywide.”

In early trading, Bank of America shares rose roughly 3 percent, a sign that investors hope this deal will lift a cloud that has been hanging over the stock since last year. The bank’s mortgage woes have been considered a main reason why it has underperformed giant peers like JPMorgan Chase and Citigroup.

In addition to the $14 billion hit, the bank is taking additional charges totaling $6.4 billion in the second quarter to clean up other areas of its troubled mortgage business. That includes the $2.6 billion noncash write-off of the value of its home lending business, a move that tacitly acknowledges that it overpaid for Countrywide.

The deal will also require Bank of America, based in Charlotte, N.C., to improve its payment collection process by hiring specialists to focus on high-risk loans and to do a better job of tracking whether the bank is adhering to its own internal loan-servicing standards. 

The negotiations toward a settlement began last fall but picked up speed in recent weeks as the end of the second quarter approached. For the investors, settling avoids a costly, multiyear legal fight, while Bank of America can pile a load of its troubles into the second-quarter results and clear away one of the biggest uncertainties hanging over the company.

Last fall, Mr. Moynihan promised “hand-to-hand” combat to fight these and other legal efforts by investors to force Bank of America to make payouts for soured mortgage securities.

But he told analysts on a conference call Wednesday morning that the settlement did not mark a forced surrender. “We did fight for the last several months,” he said. “But when you look at this over all, it’s a better decision for the company. It was much more adverse to the company if we kept fighting. We’ve been battling it out.”

“It is our job, management’s job, to eliminate risk,” he added. “There is still work ahead of us on the mortgage issues but this is a major step forward for the company.”

Despite the staggering size of the settlement with the investors and other charges announced Wednesday, additional liability remains from mortgage securities that were assembled and sold by Bank of America.

Bruce Thompson, the company’s chief financial officer, said the agreement does not cover loans sold by Bank of America to other private trusts, nor does it cover mortgage securities assembled from the home loans of third parties.

He added that sales and trading in the company’s vast Wall Street business is ahead of last year but remains “below the seasonally strong first quarter.” The quarter’s results include $2.5 billion in gains from the sale of assets including the company’s Balboa insurance subsidiary and a stake that it sold in BlackRock.

Bank of America, JPMorgan Chase, Citigroup and Wells Fargo have the greatest exposure to legal claims that they bundled troubled home loans and sold them as sound investments. Together, they are likely to absorb roughly 40 percent of the industry’s mortgage-related losses.

In a recent research note, Paul Miller of FBR Capital Markets projected that Bank of America could face a total of $25 billion of losses from the soured mortgages, the most of any of the major banks.

Other big banks face sizable risks, too. Mr. Miller predicted that Chase could expect losses reaching as much as $11.2 billion. Wells Fargo has potential losses of up to $5.2 billion, while Citigroup could see losses top $3.3 billion.

The Bank of America settlement will require court approval in New York.

Under the terms of the accord, Bank of America would deliver the money to the trustee for the securities, Bank of New York Mellon, which would distribute it to the institutional investors.

The bank does not anticipate having to raise capital or sell stock to find the money for the settlement.

Still, other huge risks loom from the fallout of the subprime mortgage crisis. All 50 state attorneys general are in the final stages of settling an investigation into abuses by the biggest mortgage servicers, and are pressing the big banks to pay up to $30 billion in fines and penalties.

What’s more, insurance companies that backed many of the soured mortgage-backed securities are also pressing for reimbursement, arguing that the original mortgages were underwritten with false information and did not conform to normal standards.

In an interview on Tuesday, before reports of the Bank of America settlement, Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, worried that the unresolved mortgage claims continued to hurt the broader economy.

“Unresolved legal claims could serve as a drag on the recovery of the housing market,” Ms. Bair said. “The healing of the housing market is essential to the recovery of the broader economy.”

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