Bank of America to pay $11.6B in Fannie Mae deal
WASHINGTON—Bank of America said Monday 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 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.
The Bank of America settlement covers residential mortgage loans originated by its own home loan unit and by entities related to Countrywide Financial Corporation, which Bank of America 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 up 0.6 percent at $12.18 in opening trade in New York.
Fannie Mae and sister firm Freddie Mac were saved from collapse amid the 2008 financial crisis in a combined $180 billion government bailout.