Bank of America (BoA) pays real estate lenders Fannie Mae and Freddie Mac a total of 2.8 billion in dispute over bad loans. dollars (2.10 billion. Euro).
Charlotte – Bank of America (BoA) will pay real estate lenders Fannie Mae and Freddie Mac a total of 2.8 billion in a dispute over bad loans. dollars (2.10 billion. Euro). The settlement resolves much of the litigation with government-backed institutions, but not with private investors. The settlement with Fannie Mae and Freddie Mac is nowhere near as costly to Bank of America as many analysts had expected. Shareholders reacted with relief on Monday, driving BofA shares 6.3 percent higher. Citigroup and JPMorgan Chase also made gains.
"This is a gift for Bank of America," Christopher Whalen of Institutional Risk Analytics said of the settlement. Fannie Mae and Freddie Mac have accused Bank of America of selling them loans without meeting specifications such as proof of income from borrowers.
The settlement involves real estate loans from Countrywide, which was acquired in 2008. According to the notification, Freddie Mac accounts for 1.28 billion. Dollars in cash. This settles all claims related to Countrywide loans up to and including 2008. Fannie Mae will receive 1.34 billion. Dollars in cash. 1.52 billion for the real estate financier. Dollar. This dispute involved more than 12.000 Countrywide loans.
As a result of the settlement with Fannie and Freddie, Bank of America put up 3 billion in the fourth quarter of 2010. Dollars aside. 2 billion write-down in the mortgage and insurance division. Dollars expected, the institution reported.
Because of the fourth-quarter reserve, the company will report 21. Bank of America is likely to announce a second consecutive quarterly loss in January. Before the settlement, analysts on average had expected earnings of 25 cents per share.
Settlement doesn't put all of Bank of America's bad loan problems behind it. By their own estimates, Fannie and Freddie are still demanding repossession of loans worth 2.7 billion. Dollars. BofA Chief Financial Officer Charles Noski said, 832 million. Dollars of that was for claims that arose because of faulty records, they said. These points could be cleared up without major losses for the bank.
Add to that the demands of private investors seeking repossession of the loans. While CEO Brian Moynihan was hawkish as recently as October, negotiations with a group of those investors began last month. Nuveen Investments analyst Alan Villalon said the deal with Fannie and Freddie could be a model for negotiations with other buyers of loans. The background, he said, is stricter underwriting rules by government-backed real estate lenders.
Countrywide was once among the largest U.S. mortgage lenders. Longtime chief executive Angelo Mozilo was the first high-ranking executive to be personally convicted of wrongdoing in connection with the U.S. housing crisis.