Bank of America has decided to pay Fannie Mae and Freddie Mac $2.8 billion to settle the claims it sold to the companies in bad home loans. Bank of America made a $1.28 billion cash payment to Freddie Mac to end all 2008 claims for mortgages sold by their devastating acquisition of countrywide and paid $1.52 billion to Fannie Mae in cash and credits to settle on 12,045 Countrywide loans.
Bank of America will put aside $3 billion in the fourth quarter to settle the claims with Fannie Mae and Freddie Mac and feels that this, along with a $2 billion goodwill impair charge to their home loans and insurance business unit, will resolve the remaining exposure they have with the companies. Fannie Mae states that this addresses about 44 percent of the $7.7 billion outstanding repurchase requests for the end of September.
Bank of America’s shares went up 4 percent in premarket trading and investors are scared that the bank will need to buy back billions of home loans they feel should never have been sold to them due to the fact that they did not meet the investor’s underwriting guidelines. Bank of America previously fought with these mortgage investors but has since decided to negotiate with them regarding these claims.
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