Regarding the misleading sale of mortgage bonds to Fannie Mae and Freddie Mac before the crisis hit, Bank of America has signed a $9,5 billion settlement with the Federal Housing Finance Agency (FHFA), the agency that regulated the two groups nationalized in September 2008. The two groups guaranteed and still guarantee the great majority of American mortgages.
The lender estimates a $3,7 billion, 21 cents per share reduction in first-quarter pre-tax earnings as a result.
The bank will make a cash payment of $6,3 billion and repurchase the so-called mortgage-backed securities for approximately $3,2 billion. The deal covers $57,5 billion in assets sold by Bank of America and Countrywidee Merrill Lynch.
The third largest US bank by assets explained that the settlement puts an end to "one of the most significant pieces still open" in the negotiations with the authorities. However, Bank of America remains subject to investigations by the US Department of Justice and other regulators.
For Melvin Watt, director of the FHFA, the agreement "represents an important step in helping to restore stability in the general mortgage market". The settlement is similar to those achieved by Morgan Stanley, JPMorgan Chase and DeutscheBank.
