Bank of America to Pay Fannie Mae $11.6 Billion to Buy Back Troubled Loans
Bank of America and Fannie Mae have agreed to settle legal issues stemming from the subprime mortgage crisis. The bank will pay Fannie Mae $3.6 billion in cash and will also spend $6.7 billion to repurchase certain mortgages sold to Fannie Mae. YUKI NOGUCHI, BYLINE: Five years ago this week, Bank of America agreed to buy Countrywide, a one-time giant that underwrote many, many billions of dollars of troubled loans. Fannie Mae bought many of those loans and backed them with government guarantees. And that is how both Fannie and BofA wound up in a world of hurt. KAREN SHAW PETROU: It was a failure of governance. It was a failure of regulation. It was a failure of deals that never should have been approved. NOGUCHI: Karen Shaw Petrou is an analyst and managing partner at Federal Financial Analytics. She says the deal today goes a long way in resolving the bank’s entanglements with Fannie Mae. BofA will pay Fannie nearly $5 billion in cash and compensatory fees and buy back an additional $6.75 billion worth of troubled loans. PETROU: This was amongst the biggest of the disputes, if not the biggest. NOGUCHI: Does this solve a lot of the problems that taxpayers have with Fannie Mae? PETROU: No. No. No, we have billions to go there.
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