B of A buys bad guaranteed loans back from Fannie and Freddie
Bank of America has reached an agreement to compensate Freddie and Fannie for selling them toxic guaranteed loans. The largest bank in the nation will pay more than $3 billion to the troubled mortgage houses. B of A is expected to take a loss on the deal.
Bank of America to make amends for bad guaranteed loans
Bank of America has finalized an agreement to compensate Freddie Mac and Fannie Mae for toxic mortgage assets sold to the two mortgage houses, according to MSN. Not all of the bad guaranteed loans were sold to Freddie or Fannie by Bank of America, however. The settlement is largely over loans that were originated by Countrywide, which was purchased by and merged into Bank of America in 2008. Prior to that, Countrywide had been one of the largest loan lenders in the nation for mortgages. Of all people who bought a home from New York to San Diego and all points in between before the 2008 mortgage crisis, about one in five got their home loans from Countrywide. Bank of America took over responsibility for all Countrywide assets, including settling with Fannie and Freddie.
Expected loss for largest national bank
It is expected that Bank of America, the largest bank in the nation, will file a $2 billion loss for the fourth quarter of 2010. The bank has set aside more than $3 billion for Freddie and Fannie for Countrywide mortgages and others sold to the mortgage houses. B of A has already bought more than $11 billion in bad bank loans from the two houses, with around $2.7 billion left. Still, Bank of America probably won’t need a cash advance to see the agreement to the end.
Mortgage houses still owed
Numerous large banks still owe Freddie Mac and Fannie Mae some considerable sums, as toxic mortgage assets sold to the two have to be either bought back or compensated for. The government still runs the two companies.