Bank of America set to pay $11.6 bln in mortgage deal
WASHINGTON - Agence France-Presse
People pass a Bank of America brach, in New York, Jan. 7, 2013. Bank of America will pay $10.3 billion to the government mortgage agency Fannie Mae to settle mortgage-backed claims. AP photo
Bank of America said Jan. 7 it would pay $11.6 billion to settle claims on soured loans sold to government-backed mortgage finance giant Fannie Mae during the home price bubble.Under the agreements, Bank of America Corp. said it would pay $3.55 billion in cash to Fannie Mae and repurchase for $6.75 billion some residential mortgage loans it had sold to the government-controlled firm.
In addition, Bank of America will pay $1.3 billion to address mortgage servicing issues, Fannie Mae said in a separate statement.
“A favorable resolution of this long-standing dispute between Fannie Mae and Bank of America is in the best interest of taxpayers,” said Bradley Lerman, Fannie Mae executive vice president.
Fannie Mae, the nation’s largest mortgage buyer, said the deal would compensate it for actual and projected losses resulting from the loans.
The loans had been bundled into mortgage-backed securities and bought by the finance giant over 2000-2008, but had not met its underwriting standards.
As the housing bubble collapsed, Fannie Mae and sister firm Freddie Mac were reeling on the brink of bankruptcy from soured loans.
The government stepped in with a combined $180 billion taxpayer-funded bailout in September 2008 and put both firms - responsible for the bulk of U.S. mortgages - under the control of the Federal Housing Finance Agency. The government is not expected to recover much of the money it injected into the two.
The settlement announced Monday covers residential mortgage loans originated by Bank of America’s own home loan unit and by entities related to Countrywide Financial Corporation, which the bank acquired in 2008.
“These agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time,” said Brian Moynihan, Bank of America chief executive.
The Charlotte, North Carolina-based bank estimated the measures would reduce pre-tax earnings for the 2012 fourth quarter by $2.7 billion.
Shares in Bank of America were flat at $12.11 in morning trade in New York.
Mortgage clean-up
For the struggling bank, the Fannie Mae settlement marks another milestone in its efforts to extricate itself from the US mortgage crisis that shook global financial markets in 2007-2008 and sparked the U.S. Great Recession.
Much of its problems stemmed from its acquisition of Countrywide, which was, at the height of the US housing boom in the 2000s, the largest mortgage origination company in the United States.
As did many mortgage lenders, Countrywide resold most of its home loans to Fannie and Freddie, which fund more than half of the home mortgages in the country.
U.S banks looking for settlement
WASHINGTON – The Associated PressOn the same day that Bank of America agreed to pay $11.6 billion to Fannie Mae, U.S. banks have taken another step to clear away the wreckage of the 2008 financial crisis by agreeing to pay $8.5 billion to settle charges that they wrongfully foreclosed on millions of homeowners.
The deal announced Jan.7 could compensate hundreds of thousands of Americans whose homes were seized because of abuses. The agreement will also help eliminate huge potential liabilities for the banks.
The banks, which include JPMorgan Chase, Bank of America and Wells Fargo, will pay about $3.3 billion to homeowners to end the review of foreclosures. The rest of the money - $5.2 billion - will be used to reduce mortgage bills and forgive outstanding principal on home sales that generated less than borrowers owed on their mortgages.
A total of 3.8 million people are eligible for payments under the deal.
