Bank of America announced more than $14 billion of legal settlements regarding bad mortgages it sold to investors as well as flaws in its foreclosure procedure. It is a step closer to ending the mortgage problems it faced for years.
Around $3 billion of Bank of America’s settlements were part of the $8.5 billion deal among 10 big mortgage lenders and regulators to end the loan-by-loan review of foreclosures mandated by the government.
Bank of America shares reached their highest level in almost two years. Investors described the move as a good step toward ending the bank’s multiple legal problems. The shares later dropped to close 0.2 percent at $12.09.
Analysts predicted that Bank of America has paid out some $40 billion for mortgage settlements since the home loan crisis began. Most of the losses came from Bank of America’s 2008 purchase of Countrywide Financial, which was once the largest subprime lender in the United States.
Analysts and investors expect the bank moving towards freeing itself from mortgage problems. Then it can move on and focus on growth. It is moving in the right direction in trying to put all the issues behind the company.
The second largest US bank announced another settlement with government mortgage finance company Fannie Mae. This is to end the claims that the bank sold mortgages that later turned soured. It would also resolve questions about the delays in foreclosures.
Bank of America had already set aside money to cover most of the settlements. The settlement with Fannie erases 44 percent of the buy-back requests that the bank faced at the end of the third quarter. It estimates that future repurchase requests cost around $300 billion in loans.
Bank of America still needs court approval for $8.5 billion settlement with private investors. It is also in a legal battle against insurer MBIA over claims connected with mortgages.