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Bank of America in $10 Billion Settlement with Fannie Mae


Bank of America has reached a $10.3 billion settlement with Fannie Mae to deal with questionable home loans it sold to the government-backed mortgage financer during the housing bubble.

BofA will pay $3.55 billion in cash to Fannie as part of the deal. It will also repurchase 30,000 questionable mortgages that are likely to produce losses, paying Fannie $6.75 billion for the loans. The loans had been bundled into mortgage-backed securities, and then were bought and guaranteed by Fannie Mae.

The purchase of bad home loans by Fannie Mae led to massive losses, a government takeover in 2008 and a $116 billion bailout to keep it functioning as a major source of home loans.

The loans were originated between 2000 and 2008 by Countrywide Financial, a leading mortgage and subprime home loan lender that BofA purchased for $4 billion in 2008. The loans covered by the settlement had an original value of $1.4 trillion.

In addition, BofA announced it agreed to sell the servicing rights on 2 million other mortgages worth a total of about $306 billion, as the bank moves to put distance between itself and many of its problematic home loans. BofA will pay an additional $1.3 billion to Fannie to resolve servicing issues.

The agreement comes the same day that the Federal Reserve and the Office of the Comptroller of the Currency reached a separate $8.5 billion settlement with 10 banks, including BofA, to settle foreclosure abuse charges.

Analysts have estimated that Bank of America has paid out some $40 billion for mortgage settlements since the crisis began. Most of those losses stem from its 2008 purchase of Countrywide Financial, once the largest subprime lender in the United States.

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