Settlement Reached Between The Bank Of America And Fannie Mae

Settlement Reached Between The Bank Of America And Fannie Mae

A settlement worth $10.3 billion was reached between the Bank of America and Fannie Mae. The agreement took care of doubtful home loans that were bought by the mortgage financier.

The deal will make it necessary for Bank of America to make a cash payment of $3.55 billion to Fannie Mae. Around 30,000 doubtful mortgages, which may result to losses, will also be repurchased at $6.75 billion. Fannie Mae purchased and guaranteed the loans, which resulted to huge losses. The government took over in 2008 and a bailout worth $116 billion was released.

The loans came from Countrywide Financial, which was purchased by the Bank of America in 2008 for $4 billion. The settlement covered loans that were originally valued at $1.4 trillion.

The servicing rights of the Bank of America for two million mortgages will also be sold. The mortgages are valued at around $306 billion. A number of servicing issues will also be dealt with as the bank will make another $1.3 billion payment to Fannie Mae.

The settlement between Fannie Mae and the Bank of America came as a separate agreement was reached by the Office of the Comptroller of Currency and the Federal Reserve with ten banks. The agreement is worth $8.5 billion. The banks that were included in the settlement were Aurora, Citigroup, JPMorgan Chase, MetLife Bank, PNC, SunTrust, US Bank, Wells Fargo, Sovereign Bank, and the Bank of America.

The Bank of America had earlier repurchased $2.87 billion worth of bad loans in 2010. These loans were purchased by Fannie Mae and Freddie Mac from Countrywide Financial. The inspector general that oversaw the bailout of Freddie Mac and Fannie Mae criticized the deal since it supposedly let off the Bank of America too lightly.

Another 2011 settlement also saw the Bank of America paying $355 million to deal with complaints on unfair lending practices.

Posted by peter on Tuesday January 08 2013, 2:34 PM EST. Ref: CNN. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0