Bank of America takes a $3-billion mortgage settlement charge
03 Jan 2011
Bank of America Corp has agreed to settle $3 billion in outstanding claims, including poorly underwritten mortgages it sold to government sponsored Fannie Mae and Freddie Mac.
Bank of America said it paid around $1.28 billion to Freddie Mac and $1.34 billion to Fannie Mae on 31 December to resolve a faulty mortgage loan dispute involving Countrywide Financial Corp.
Countrywide, which had sold 12,045 bad mortgages to Fannie Mae and Freddie Mac in deals related to the housing crisis of 2008, is now under Bank of America's fold.
The over $2.6 billion of payments to Freddie and Fannie along with potential losses on future repurchases from government-sponsored enterprises adds up to $3 billion, the bank said.
Bank of America expects to take an additional $2 billion charge to fourth-quarter results from the decline in the mortgage business, bringing the total impact to the company to $5 billion.
Fannie Mae said the current agreement with Bank of America addresses about 44 per cent of its $7.7 billion in outstanding repurchase requests as at end-September.
Meanwhile, Bank of America had lost a cache of information after a 5GB hard drive of one of its executive was found removed. About 15 to 20 officials of bank Of America, along with consulting firm Booz Allen Hamilton, will be scouring thousands of leaked documents in the event that they become public.
