Bank of America (BofA) has finished negotiating with Fannie Mae about warranty claims made against mortgage packages issued by Countrywide Financial and several other small firms that BofA now owns. This package, valued at over $10 billion will consist of a cash payment of $3.55 billion and a repurchasing of mortgage assets valued at $6.75 billion. This payment and repurchasing will take place immediately.
Small Mortgage Companies
The warranty claimed filed by government-backed Fannie Mae stated that these small mortgage companies loosened lending standards or did not adhere to common practices so that they could profit from the creation and sale of mortgage backed securities.
In addition to this settlement, BofA will sell its rights to service two million mortgages valued at $306 billion. The two institutions that will purchase these mortgage servicing rights are Newcastle Investment Corporation and Nationstar Mortgage Holdings.
FreddieMac Deal In 2011
This settlement is similar to the less expensive one made with FreddieMac in 2011. Bank of America also has similar settlement negotiations taking place with the New York Federal Reserve Bank, PIMCO, and BlackRock. The bank also recently settled with the federal government in excess of $10 billion for the robo-signing scandal.
FannieMae has stated that they are quite pleased with the settlement and believe that this was in the best interest of the taxpayer. FannieMae has been diligently trying to recover losses from mortgage backed securities that were incorrectly packaged and misrepresented when sold.
An executive for BofA has stated that they are pleased that this settlement took place that is in the best interest of all parties. The settlement and release of the servicing rights will help BofA streamline their business and reduce expenses which is beneficial to everyone.
As with other bank settlements in the past, these settlements are not expected to have any impact on NJ mortgage rates in the near future. In fact, after the last two major settlements, mortgage rates dropped, even if it was only a slight decrease.
Public Relief and Consumer Confidence Boost
The impact of these negotiations and settlements has had little impact on Bank of America or its stock pricing. Right after the final settlement amount was announced, there was very little fluctuation in stock pricing. Experts believe that these settlements provide relief to the public and builds consumer confidence, which helps maintain stock stability.
Many experts also believe that as all of these settlements come to a close, the real estate market will flourish as mortgages become more readily available again. Most of the large banks have been focusing their efforts on these cases instead of marketing mortgages to the public. Now, with these settlements finally coming to completion, the banks can return to making mortgages which will help the real estate market and the overall economy.
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Derek enjoys blogging about financial issues and business news. When he is not blogging, he enjoys working at a marketing firm outside of NYC. The article above is for nj mortgage rates.