The Bank has agreed to pay $3.6bn to Fannie Mae and repurchase bad mortgage loans sold in the run up to 2008 at a value of $6.75bn, the Wall Street Journal reported. It expects its total payments in settlements to reduce its fourth-quarter pre-tax profit by $2.7bn.
Bank of America chief executive officer Brian Moynihan said: “Together, these agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time.”
The settlement, which relates to $1.4 trillion worth of outstanding mortgage loans, ended the Bank’s dispute with Fannie Mae over whether it should buy back questionable loans sold to the government-sponsored mortgage company at the height of the housing bubble.
At the same time, Bank of America has agreed to sell the servicing rights on roughly two million mortgages to two specialist counterparties.
It comes as ten US banks, including the Bank of America, agreed to pay more than $8.5bn to end a long, expensive and widely-criticised regulatory probe into their foreclosure practices. The sum includes $3.3bn in direct compensation payments to eligible borrowers and $5.2bn in other assistance such as loan modifications.
Comptroller of the Currency Thomas Curry said: “Carrying the process through to its conclusion would divert money away from the impacted homeowners and also needlessly delay the dispensation of compensation to affected borrowers.”
