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 yesterday.
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
"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
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