Bank of America to pay Fannie Mae billions for bad mortgages
Bank of America said on September 28, 2012, that it agreed to pay $2.43 billion to settle a lawsuit related to its acquisition of Merrill Lynch.
Bank of America will shell out billions to settle a deal with government mortgage agency Fannie Mae over claims that the bank sold the agency bad mortgages.
The bank will pay Fannie Mae $3.6 billion in cash and buy back $6.75 billion in loans that Bank of America and Countrywide Financial sold to the agency between 2000 and 2008, The Washington Post reported.
Bank of America will also pay a fine of $1.3 billion to Fannie for dealing with the foreclosures too slowly.
"A favorable resolution of this long-standing dispute between Fannie Mae and Bank of America is in the best interest of taxpayers," Bradley Lerman at Fannie Mae told the BBC.
The company said the loans sold by Bank of America "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."
According to NBC News, the settlement is a sign that the bank is finally able to shake off its mortgage problems, much of which came from the disastrous purchase of Countrywide Financial back in 2008.
Government-backed Fannie Mae and its sibling company, Freddie Mac, have claimed that banks sold them toxic debts and should be responsible for the losses.
Together, Fannie and Freddie lost more than $30 billion when the housing market collapsed. The BBC reported that the losses came mainly from their investments in subprime mortgages and resulted in a bailout from the US government.
American taxpayers have spent more than $140 billion to keep the firms financially solvent.
Bank of America settled with Freddie Mac in 2011.
A separate settlement, also announced Monday, will see ten of the country's biggest banks pay out $8.5 billion over regulators' claims that they didn't follow the correct procedures for foreclosures, The Wall Street Journal reported.
Bank of America is one of the ten banks required by the Office of the Comptroller of the Currency and the Federal Reserve to pay $3.3 million in cash to 3.8 million mortgage borrowers whose homes were foreclosed in 2009 or 2010.