Bank of America said Monday that it has reached a $10 billionsettlement with federal mortgage issuer Fannie Mae over allegations ofthe improper handling of mortgages during the financial crisis.
TheCharlotte, N.C-based bank will pay $3.6 billion to settle claimsrelated to the sale and delivery of certain residential mortgage loans.
And Bank of Americawill also repurchase $6.75 billion worth of residential mortgage loansit sold to Fannie Mae for less than what the bank said they worth.
In futures trading, the bank's stock was up about 2%.
Bankof America's CEO Brian Moynihan said in a statement announcing thesettlement: "Together, these agreements are a significant step inresolving our remaining legacy mortgage issues, further streamlining andsimplifying 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.
Theclaims relate to loans that Bank of America and Countrywide Financialissued from Jan. 1, 2000, through Dec. 31, 2008. Bank of America boughtthe now-defunct Countrywide Financial in July 2008, months before thefinancial meltdown triggered by the bursting of a residential realestate bubble. Countrywide had been a giant in mortgage lending but wasalso 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.