Finally, Bank of America says it will spend more than $10 billion to settle mortgage claims resulting from the housing meltdown. This was announced Monday, the bank will pay $3.6 billion to Fannie Mae and buy back $6.75 billion in loans that the North Carolina-based bank and its Countrywide banking unit sold to the government agency from Jan. 1, 2000 through Dec. 31, 2008. That includes about 30,000 loans.
Bank of America bought Countrywide Financial Corp. in July 2008, just before the financial crisis. Countrywide was a giant in mortgage lending, but was also known for approving risky loans. Fannie Mae and Freddie Mac, which packaged loans into securities and sold them to investors, were effectively nationalized in 2008 when they nearly collapsed under the weight of their mortgage losses.
Bank of America’s purchase of Countrywide originally was lauded by lawmakers because the bank was viewed as stepping in to eliminate a bad actor from the mortgage market. But instead of padding Bank of America’s mortgage business, the purchase has drawn a drumbeat of regulatory fines, lawsuits and losses.
Bank of America said that the loans involved in the settlement have an aggregate original principal balance of about $1.4 trillion. The outstanding principal balance is about $300 billion. Bank of America Corp., which is based in Charlotte, N.C., also said that it is also selling mortgage servicing rights on about 2 million residential mortgage loans. The loans have an aggregate unpaid principal balance of approximately $306 billion.