Bank of America to Pay Fannie Mae for Mortgage Claims
Stemming from 2008 Financial Crisis
Bank of America (NYSE: BAC) announced yesterday it will pay Fannie Mae $3.6 billion in an effort to settle home-loan repurchase claims and $6.75 billion to repurchase home mortgages it had sold to Fannie Mae.
Countrywide Financial Corp. is at the heart of this drama. Bank of America had acquired Countrywide back in 2008, and Countrywide was the culprit in wide-scale mortgage losses during the financial crisis from 2008 onward.
Since then, Fannie Mae, Freddie Mac, and other mortgage buyers have lined up with compensation claims. Although it was these very losses that resulted in Bank of America buying up Countrywide, problems have continued, resulting in Bank of America running up more than $40 billion in costs.
“These agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time,” Bank of America Chief Executive Officer Brian Moynihan, 53, said in the statement.
The agreement in question covers a period between 2000 and 2008 and $300 billion in outstanding principal on loans made to Fannie Mae. Separately, Bank of America will also sell off purchasing rights on about $306 billion in home loans.
Shares for Bank of America were down 0.66% to $12.01 on Tuesday morning.