BBC News, 7
January 2013
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| The bank is also the subject of a civil lawsuit brought by federal prosecutors |
In
addition, it has agreed to buy back 30,000 mortgages for $6.75bn, and pay a
further $1.3bn in compensation.
Fannie Mae
argued the bank sold it toxic debts and should be responsible for the losses it
suffered as result.
Separately,
ten big mortgage providers agreed to pay $8.5bn in compensation for mistakes in
repossessing homes.
The banks
include Bank of America, Citigroup, JP Morgan and Wells Fargo. They will pay
$3.3bn directly to homeowners, some of whom should not have lost their homes,
regulators said.
Individual
owners will receive anything from a few hundred dollars to $125,000.
Loan
assistance and write-offs will make up the remaining $5.2bn.
Heavy
losses
Fannie Mae
supports the US mortgage market, which collapsed in 2008 after the housing
bubble burst.
In the
run-up to the financial crisis of 2007-8, home loans grouped together and sold
on as investments became increasingly popular.
When the
underlying mortgage holders were unable to repay their debts, the investments
plummeted in value, with disastrous consequences for banks all over the world.
Freddie Mac
is the other government mortgage agency. The two firms lost more than $30bn, partly
because of their investments in the subprime mortgages, and were bailed out by
the US government.
Since the
rescues, US taxpayers have spent more than $140bn to keep the firms afloat.
Bank of
America settled with Freddie Mac in 2011.
'Significant
step'
The
agreement brings to an end a long-running dispute between Fannie Mae and Bank
of America.
"A
favourable resolution of this long-standing dispute between Fannie Mae and Bank
of America is in the best interest of taxpayers," said Bradley Lerman at
Fannie Mae.
The company
said the loans "did not meet our standards at the time of origination, and
we are pleased to have reached an appropriate agreement to collect on these
repurchase requests."
The
agreement covers loans worth about $1.4tn, with outstanding balances of $300bn.
Bank of
America said the settlements were "a significant step in resolving our
remaining legacy mortgage issues".
In October,
the US government sued the bank for alleged mortgage fraud, accusing subsidiary
Countrywide Financial of selling thousands of toxic home loans to Fannie Mae
and Freddie Mac.
Earlier in
the month, it took similar action against the banks Wells Fargo and JP Morgan
Chase.
In October,
JP Morgan was sued for allegedly defrauding investors who lost more than $20bn
on mortgage-backed securities sold by Bear Stearns.
JP Morgan,
which bought the investment bank in March 2008, said the allegations related to
actions at Bear Stearns prior to its takeover.
In the same
month, Wells Fargo was also sued by federal authorities for alleged mortgage
fraud.
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