Image Source: Washington Post

BY KERRY LEARY

ANCHOR NEVILLE MILLER

Bank of America announced Monday it will pay $10 billion to Fannie Mae in a settlement regarding allegations that mortgages weren’t handled properly during the financial crisis.

“This basically settles allegations and charges over questionable home loans. These are all the loans that ended up being sold to the government during the housing bubble.”

Bank of America will pay $3.6 billion of the settlement in cash and will also repurchase $6.75 billion worth of residential mortgage loans... but that’s just the beginning of it. Fox Business reports:

“The bank also said it agreed to sell servicing rights on 2 million residential mortgage loans worth about $306 billion. Plus, the bank will pay $1.3 billion to Fannie Mae to compensate the federal mortgage issuer for loan servicing fees.”

Bank of America’s stock price was up about .5% to over just $12 a share in trading Monday morning. The BBC reports, US banks packaged together home loans in 2007 and sold them to one another.

“It then turned out of course, none of these loans were being repaid on and so therefore Fannie Mae found they were worth quite as much as they previously thought.”

So, what does this mean for Bank of America? The New York Times reports the bank says it expects the settlement to hurt its fourth-quarter earnings by $2.5 billion.

“The firm also expects to record a $700 million charge, an accounting move known as a debt-valuation adjustment, related to an improvement in the prices of its bonds.
The deal … helps the bank move away from its troubled mortgage business. Still, the bank’s attempts to resolve other costly mortgage litigation have so far been stymied.”

Bank of America is among 14 banks said to be negotiating with federal regulators to resolve claims related to foreclosure abuses.

Bank of America-Fannie Mae Settlement Tops $10 Billion

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Jan 7, 2013

Bank of America-Fannie Mae Settlement Tops $10 Billion

Image Source: Washington Post

BY KERRY LEARY

ANCHOR NEVILLE MILLER

Bank of America announced Monday it will pay $10 billion to Fannie Mae in a settlement regarding allegations that mortgages weren’t handled properly during the financial crisis.

“This basically settles allegations and charges over questionable home loans. These are all the loans that ended up being sold to the government during the housing bubble.”

Bank of America will pay $3.6 billion of the settlement in cash and will also repurchase $6.75 billion worth of residential mortgage loans... but that’s just the beginning of it. Fox Business reports:

“The bank also said it agreed to sell servicing rights on 2 million residential mortgage loans worth about $306 billion. Plus, the bank will pay $1.3 billion to Fannie Mae to compensate the federal mortgage issuer for loan servicing fees.”

Bank of America’s stock price was up about .5% to over just $12 a share in trading Monday morning. The BBC reports, US banks packaged together home loans in 2007 and sold them to one another.

“It then turned out of course, none of these loans were being repaid on and so therefore Fannie Mae found they were worth quite as much as they previously thought.”

So, what does this mean for Bank of America? The New York Times reports the bank says it expects the settlement to hurt its fourth-quarter earnings by $2.5 billion.

“The firm also expects to record a $700 million charge, an accounting move known as a debt-valuation adjustment, related to an improvement in the prices of its bonds.
The deal … helps the bank move away from its troubled mortgage business. Still, the bank’s attempts to resolve other costly mortgage litigation have so far been stymied.”

Bank of America is among 14 banks said to be negotiating with federal regulators to resolve claims related to foreclosure abuses.

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