Bank of America settles with Fannie Mae. $10B for risky home loans.
| Charlotte, N.C.
聽Bank聽of聽America聽says it will spend more than $10 billion to settle mortgage claims resulting from the housing meltdown.
Under the deal announced Monday, the聽bank聽will pay $3.6 billion to Fannie Mae and buy back $6.75 billion in loans that the North Carolina-based聽bank聽and its Countrywide聽banking聽unit sold to the government agency from Jan. 1, 2000 through Dec. 31, 2008. That includes about 30,000 loans.
Its shares edged up 14 cents to $12.25 in premarket trading after the announcement.
CEO Brian Moynihan said the agreements were "a significant step" in resolving the聽bank's聽remaining legacy mortgage issues while streamlining the company and reducing future expenses.
叠补苍办听辞蹿听础尘别谤颈肠补听产辞耻驳丑迟 Countrywide Financial Corp. in July 2008, just before the financial crisis. Countrywide was a giant in mortgage lending, but was also known for approving risky loans.
Fannie Mae and Freddie Mac, which packaged loans into securities and sold them to investors, were effectively nationalized in 2008 when they nearly collapsed under the weight of their mortgage losses.
Bank聽of聽America's聽purchase of Countrywide originally was lauded by lawmakers because the聽bank聽was viewed as stepping in to eliminate a bad actor from the mortgage market. But instead of padding聽Bank聽of聽America's聽mortgage business, the purchase has drawn a drumbeat of regulatory fines, lawsuits and losses.
Bank聽of聽America聽said that the loans involved in the settlement have an aggregate original principal balance of about $1.4 trillion. The outstanding principal balance is about $300 billion.
"Fannie Mae has diligently pursued repurchases on loans that did not meet our standards at the time of origination, and we are pleased to have reached an appropriate agreement to collect on these repurchase requests," Bradley Lerman, Fannie Mae executive vice president and general counsel, said in a statement.
Bank聽of聽America聽Corp., which is based in Charlotte, N.C., also said that it is also selling mortgage servicing rights on about 2 million residential mortgage loans. The loans have an aggregate unpaid principal balance of approximately $306 billion.
The transferring of the servicing rights is expected to take place throughout the year.
In addition, the聽bank聽will pay $1.3 billion to Fannie Mae to settle loan servicing compensatory fee obligations.
Bank聽of聽America聽said its fourth-quarter will include various items related to the settlement and other matters, but that it expects "modestly positive" earnings for the period.
