CHARLOTTE, N.C. - (Mealey's) Bank of America Corp. will
pay $3.6 billion to Fannie Mae and repurchase $6.75 billion in certain
residential mortgage loans sold to Fannie Mae to resolve certain issues
"relating to the origination, sale and delivery of substantially all
residential mortgage loans originated and sold directly to Fannie Mae from
January 1, 2000 through December 31, 2008 by entities related to Countrywide
Financial Corporation (legacy Countrywide) and Bank of America, National
Association," according to a Bank of America press release issued Jan. 7.
According to the press release, Bank of America has also
signed "definitive agreements with two counterparties to sell the servicing
rights on certain residential mortgage loans serviced for Fannie Mae, the
Federal Home Loan Mortgage Corporation (Freddie Mac), the Government National
Mortgage Association (Ginnie Mae), and private label securitizations, with an
aggregate unpaid principal balance of approximately $306 billion.
Transfers of servicing rights are subject to the approval or consent of certain third parties."
According to the press release, the sales involve about 2
million loans serviced by Bank of America, "including approximately 232,000
loans classified as 60+ day delinquent first mortgage loans."
"The agreements with Fannie Mae cover loans with an
aggregate original principal balance of approximately $1.4 trillion and an
aggregate outstanding principal balance of approximately $300 billion,"
according to the press release.
"Unresolved claims by Fannie Mae for alleged breaches of
selling representations and warranties with respect to these loans totaled
$11.2 billion of unpaid principal balance at September 30, 2012. These
agreements extinguish substantially all of those unresolved claims, as well as
any future representations and warranties claims associated with loans sold
directly to Fannie Mae from January 1, 2000 to December 31, 2008, subject to
certain exceptions which Bank of America does not expect to be material."
In addition to the $3.6 billion case payment and $6.75
billion repurchase of residential mortgage loans, Bank of America has also
agreed to make a cash payment to Fannie Mae to settle "substantially all of
Fannie Mae's outstanding and future claims for compensatory fees arising out of
past foreclosure delays. This payment is expected to be covered by
existing reserves and an additional provision of $260 million (pretax) recorded
in the fourth quarter of 2012. Together, these actions described above
are expected to reduce Bank of America's pretax income by approximately $2.7
billion in the fourth quarter of 2012."
"The Fannie Mae agreement also clarifies the parties'
obligations with respect to mortgage insurance, including by establishing
timeframes for certain payments and other actions, as well as parameters for
potential bulk settlements and by providing for cooperation in future dealings
with mortgage insurers," according to the press release.
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