Bank of America To Sell Additional $100B Mortgage Rights

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Bank of America To Sell Additional $100B Mortgage Rights
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Bank of America Corp (NYSE:BAC) is planning to sell the rights of an additional $100 billion mortgages, according to report from Reuters, citing two sources familiar with the issue.

Bank of America To Sell Additional $100B Mortgage Rights

Dan Frahm, spokesperson for Bank of America Corp (NYSE: BAC), explained that the move was part of the bank’s strategy, and it has been selling mortgage servicing rights. He said, “By reducing the size of our portfolio, we improve customer service capacity and resolve legacy mortgage issues and reduce the risk in our portfolio.”

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According to Reuters, Frahm did not provide further information regarding the proposed sale of additional $100 billion mortgages.

Yesterday, Bank of America Corp (NYSE:BAC) announced that it entered an agreement to sell its servicing rights of 2 million residential mortgage loan for approximately $306 billion. The bank also agreed to pay $10.3 billion to Fannie Mae; to resolve agency mortgage claims on loans originated and sold directly to the government backed mortgage agency during the housing bubble.

Under the agreement, Bank of America will repurchase $6.7 billion in loans the bank and its subsidiary, Countrywide Financial, sold to Fannie Mae from January 1 to December 31, 2008. The Bank also agreed to pay $3.6 billion cash to Fannie Mae.

According to Brian Moynihan, chief executive officer of Bank of America Corp (NYSE:BAC), the agreements are significant steps in resolving the bank’s legacy mortgage issues and to streamline and simplify the company further as it reduces expenses over time.

Yesterday,  BAC announced Fannie Mae settlement of unresolved reps and warranties claims related to $11.2B UPB (at 3Q12) of loans sold to FNM between 2000-2008.

Pursuant to the agreement, BAC will pay FNM $3.6B, in addition to repurchasing $6.75B of loans sold to FNM. The agreement covers approximately 93% of the $12.3B UPB in outstanding claims from the GSE’s, and represents roughly 44% of total outstanding reps and warranties claims ($25.5B at 3Q12).

The agreement, which is expected to effectively eliminate legacy FNM exposure, is expected to have $2.5B (ptx) impact in 4Q12 — tied to incremental R&W provisions (the remainder is expected to be covered by existing reserves).

Additionally, BAC will compensate FNM for fees arising out of foreclosure delays, which is expected to require an incremental provision of $260mm. The total 4Q12 impact of the settlement is expected at $2.7B, or roughly $0.16/share.

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