Bank of America agrees to compensate Freddie Mac and Fannie Mae
Newscast Media HOUSTON, Texas –In an agreement that is likely to be repeated across the banking industry in the US, embattled financial institute Bank of America, has paid more than $2.5bn to settle a dispute over claims that it sold faulty mortgages to government-backed lenders. Bank of America said it paid $1.28bn to Freddie Mac and $1.34bn to Fannie Mae to resolve claims its Countrywide division sold products to the two giant mortgage lenders – whose loans are guaranteed by the US government – that may not have met underwriting standards.
Bank of America and its rivals have faced pressure from Freddie and Fannie and also private investors to either buy back mortgages or provide compensation for those loans that soured dramatically once US house prices started falling in late 2006. Most of the claims against Bank of America stem from mortgages sold by Countrywide Financial, a lender that Bank of America bought in a fire sale in summer 2008.
Brian Moynihan, Bank of America’s chief executive, said yesterday that the agreements “resolve substantial legacy issues in the best interest of our shareholders”. Shares in the bank, which is based in Charlotte, North Carolina, climbed almost 5pc to $13.83 in early trading on Wall Street.
The bank said that the settlement, which covers more than $127bn of mortgages sold by Countrywide, resolves all claims made by Freddie and Fannie. However, Bank of America still faces billions of dollars in claims from private investors who allege they were sold faulty mortgages. Mr Moynihan said in October the bank would fight those investors whose attitude was “I bought a Chevy Vega but I want it to be a Mercedes”. http://newscastmedia.com/bankofamerica-freddie.html