Bank Of America To Pay $9.3 Billion To Settle Mortgage Bond Claims

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Bank Of America To Pay $9.3 Billion To Settle Mortgage Bond Claims

Bank of America has agreed to pay $9.3 billion to settle claims with Fannie Mae and Freddie Mac after selling the institutions faulty mortgage bonds. The Federal Housing Finance Agency alleged that Bank of America misrepresented the worth of loans underlying residential mortgage-backed securities bought by Fannie Mae and Freddie Mac from 2005 to 2007. The settlement resolves suits against Bank of America, Merrill Lynch, and Countrywide and will include $6.3 billion in cash with the rest in securities which Bank of America will buy from Fannie Mae and Freddie Mac. The deal covers about $57.5 billion in mortgage paper and will hurt Bank of America’s first-quarter profits, reducing them by $3.7 billion or about 21 cents per share .

By settling, Bank of America has settled liability on 88% of all claims against its residential mortgage-backed securities stemming from its acquisition of Countrywide Financial in 2008 that preceded the financial crisis. FHFA Director Melvin Watt stated that the settlement is “an important step in helping restore stability to our broader mortgage market and moving to bring back the role of private firms in providing mortgage credit.” This is the tenth settlement the FHFA has reached in litigation that started in 2011 when it filed 18 lawsuits over about $200 billion in mortgage-backed securities.

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