73
ASSOCIATED PRESS
A customer stopped at a Bank of America ATM office in Boston. Bank of America Corp. says it will spend more than $10 billion to settle mortgage claims resulting from the housing meltdown. Under the deal announced today, the bank will pay $3.6 billion to Fannie Mae and buy back $6.75 billion in loans that the North Carolina-based bank and its Countrywide banking unit sold to the government agency from Jan. 1, 2000 through Dec. 31, 2008. That includes about 30,000 loans.
CHARLOTTE, N.C. » Bank of America says it will spend more than $10 billion to settle mortgage claims resulting from the housing meltdown.
Under the deal announced today, the bank will pay $3.6 billion to Fannie Mae and buy back $6.75 billion in loans that the North Carolina-based bank and its Countrywide banking unit sold to the government agency from Jan. 1, 2000 through Dec. 31, 2008. That includes about 30,000 loans.
Its shares briefly edged up 9 cents to $12.20 in morning trading, its highest level since May 2011.
CEO Brian Moynihan said the agreements were “a significant step” in resolving the bank’s remaining legacy mortgage issues while streamlining the company and reducing future expenses.
Bank of America bought 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 of America’s purchase of Countrywide originally was lauded by lawmakers because the bank was viewed as stepping in to eliminate a bad actor from the mortgage market. But instead of padding Bank of America’s mortgage business, the purchase has drawn a drumbeat of regulatory fines, lawsuits and losses.
Bank of America 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 of America 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 bank will pay $1.3 billion to Fannie Mae to settle loan servicing compensatory fee obligations.
Bank of America 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.
