BOA reaches $10 billion settlement with Fannie Mae over faulty lending practices

[JURIST] Bank of America (BOA) on Monday reached a $10.3 billion settlement with Fannie Mae [corporate websites] to settle [press release] claims that Countrywide Financial Corporation [NYT backgrounder], now a BOA subsidiary, employed faulty lending practices on $1.4 trillion in mortgages that were sold to Fannie Mae as investment products from 2000 to 2008. BOA has agreed to pay Fannie Mae $3.55 billion in cash and to repurchase $6.75 billion in outstanding residential mortgage loans, putting to rest a dispute that has lingered since the bottom fell out of the housing market in the 2008 financial crisis. Since that time Fannie Mae and its counterpart Freddie Mac [corporate website] have been pursuing repurchases on such loans that did not meet the firms' lending standards when originated. BOA will fund the settlement agreement through the $2.5 billion in representation and warranty reserves set aside for the fourth quarter of 2012, as well as other cash reserves, and still anticipates a small fourth-quarter profit. The settlement resolves substantially all of the remaining claims against BOA by Fannie Mae. BOA reached a similar agreement with Freddie Mac for $1.4 billion in 2011.

In October US Attorney Preet Bharara [official profile] filed a $1 billion civil lawsuit against BOA [JURIST report] in the US District Court for the Southern District of New York (SDNY) [official website], with similar claims that BOA subsidiary Countrywide Financial committed fraud in originating residential mortgages. In September BOA settled [JURIST report] a $2.43 billion class action lawsuit with investors over their $18.5 billion acquisition of Merrill Lynch. In July BOA agreed to pay $375 million [JURIST report] in a settlement with bond insurer Syncora Guarantee [corporate website] over claims that Syncora was misled into insuring toxic mortgage-backed securities of Countrywide Financial. Also that month a federal judge rejected [JURIST report] a motion by BOA to dismiss a shareholder lawsuit alleging BOA's purposeful concealment of the bank's exposure to billions of dollars in loan repurchase claims and its problematic reliance on an electronic loan registry. In December BOA reached a $315 million settlement of claims brought by investors alleging they were misled with respect to mortgage-backed investments, and a $335 million settlement [JURIST reports] with the Department of Justice, relating to discriminatory lending practices.

 

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