WASHINGTON, Jan. 7 (Xinhua) -- Bank of America announced Monday that it has reached agreements with Fannie Mae to resolve home- loan repurchase claims by paying 3.6 billion U.S. dollars.
The agreements cover 300 billion dollars in outstanding principal on loans sold to Fannie Mae between 2000 and 2008, Bank of America said in a statement.
Countrywide Financial Corp., which was acquired by Bank of America in 2008, sold massive mortgage loans to Fannie Mae, a government-sponsored enterprise also known as the Federal National Mortgage Association, and other mortgage buyers before the 2008 financial crisis. These buyers has been requiring compensation for loans created by Countrywide Financial, alleging the loans were based on flawed data about the properties and borrowers.
To settle claims, Bank of America has agreed to make a cash payment of 3.6 billion dollars to Fannie Mae, the country's largest mortgage buyer. In addition, the bank will also pay 6.75 billion dollars to buy back certain residential mortgage loans sold to Fannie Mae.
These actions are expected to be covered by existing reserves and an additional 2.5 billion dollars in representations and warranties provision recorded in the fourth quarter of 2012, said the Bank of America.
"Together, these agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time," said Brian Moynihan, CEO of the bank.
These combined actions are estimated to reduce Bank of America' s pre-tax income by approximately 2.7 billion dollars in the final quarter of 2012.
In total, the legacy mortgage issues by Countrywide Financial Corp. has resulted in costs of over 40 billion dollars on Bank of America.
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