BofA reached a $9.3 billion settlement for claims that it sold Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) faulty mortgage bonds.
The Federal Housing Finance Agency, which regulates the GSEs, announced Wednesday afternoon that the settlement is an “important step in helping restore stability to our broader mortgage market and moving to bring back the role of private firms in providing mortgage credit.”
ValueWalk's Raul Panganiban interviews Dr. Kathryn Kaminski, Chief Research Strategist at AlphaSimplex, and discuss her approach to investing and the trends she is seeing in regards to quant investing and hedge funds. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with AlphaSimplex's Read More
BofA approval from court
In January, Bank of America Corp (NYSE:BAC) received approval from the State Supreme Court in Manhattan for its $8.5 billion agreement to settle the majority of the complaints filed by almost two dozen mortgage securities investors.
Analysts from Credit Suisse noted that the court approval doesn’t provide complete finality and other legal issues still remain, including the FHFA lawsuit and DOJ fraud claims.
Post-settlement with the FHFA, Bank of America Corp (NYSE:BAC) said it had now resolved around 88% of its total exposure to securities at issue in the mortgage bond litigation it has faced.
However, the bank still faces a lawsuit from the U.S. Justice Department and several other probes by the DOJ and states over mortgage-backed securities it sold during the housing boom. The bank said Wednesday it has had ‘preliminary discussions’ to resolve the matters.
Tenth settlement for FHFA
The settlement, announced Wednesday, resolves lawsuits filed against Bank of America Corp (NYSE:BAC), Merrill Lynch and Countrywide, the subprime mortgage lender it bought at the height of the financial crisis. The FHFA had accused the bank of misrepresenting the quality of loans underlying residential mortgage-backed securities purchased by the two mortgage finance companies between 2005 and 2007.
It was the 10th settlement that the FHFA has reached in litigation that began in 2011 when it filed 18 lawsuits over about $200 billion in mortgage-backed securities. The FHFA has so far recovered over $10 billion from banks by asserting similar claims over mortgage securities. Seven other banks still need to resolve similar lawsuits.
Last year, JPMorgan Chase & Co. (NYSE:JPM) reached a tentative agreement to pay a record $13 billion fine to the Justice Department (DOJ) to settle probes into its residential mortgage-backed securities. According to a Financial Times report, the DOJ is conducting a probe into at least nine banks, including BofA, concerning the sale of mortgage-backed securities.
Earlier on Tuesday, Kenneth Lewis, who turned Bank of America Corp (NYSE:BAC) into the nation’s largest bank but also saddled it with enormous losses tied to mortgages, settled a lawsuit accusing him of deceiving investors about one of his biggest acquisitions, Merrill Lynch.