Bank of America to Pay $10 Billion Over Risky Mortgages

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Bank of America Bank of America says it will spend more than $10 billion to settle mortgage claims resulting from the housing meltdown.

Under the deal announced Monday, 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 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 bank's remaining legacy mortgage issues while streamlining the company and reducing future expenses.
Related: Bank of America Hit by Another Discrimination Complaint
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. Related: Lawsuit Says Countrywide's Unethical Lending 'Brazen in Scope'
"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 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 earnings will include various items related to the settlement and other matters, but that it expects "modestly positive" earnings for the period.

Copyright 2013 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

Week Ahead Market Report: 1/7/2013


See also:
Countrywide 'VIP Loans': Few Pols Resisted Mortgage 'Gifts'
Lawmakers Took Sweetheart Deals From Countrywide, Inquiry Finds
Bank of America Forced to Pay Whistle-Blower $930,000



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