Bank of America's corporate headquarters in Charlotte, N.C.(Photo: Chuck Burton, AP)
Bank of America said Monday that it has reached a $10 billion
settlement with federal mortgage issuer Fannie Mae over allegations of
the improper handling of mortgages during the financial crisis.
Charlotte, N.C-based bank will pay $3.6 billion to settle claims
related to the sale and delivery of certain residential mortgage loans.
And Bank of America
will also repurchase $6.75 billion worth of residential mortgage loans
it sold to Fannie Mae for less than what the bank said they worth.
In futures trading, the bank's stock was up about 2%.
of America's CEO Brian Moynihan said in a statement announcing the
settlement: "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."
The bank also said it had agreed to sell the servicing rights on 2 million residential mortgage loans worth about 306 billion.
claims relate to loans that Bank of America and Countrywide Financial
issued from Jan. 1, 2000, through Dec. 31, 2008. Bank of America bought
the now-defunct Countrywide Financial in July 2008, months before the
financial meltdown triggered by the bursting of a residential real
estate bubble. Countrywide had been a giant in mortgage lending but was
also known for approving high-risk loans.
The bank said the settlement will reduce the firm's pretax income by approximately $2.7 billion in the fourth quarter of 2012.