Bank of America has reportedly agreed on a $11.6 billion dollar settlement with mortgage financier Fannie Mae. The deal includes a $3.55B cash payment and $6.75B repurchase of bad mortgages stemming from various acquisitions throughout the financial crisis. Resolving issues stemming from the acquisition of Countrywide and Merril and offloading legacy mortgages will improve the firms operating ability on many levels, but Bank of America is definitely not out of the woods yet.
Brian Moynihan, BofA’s CEO who took position during the crisis, has shifted mortgage strategy away from traditional avenues. The WSJ reports:
Bank of America has sharply pared back its mortgage-origination channels over the past two years, largely as a result of rising legal costs resulting from the Countrywide acquisition. It has exited the business of funding third-party loans in favor of lending to customers with which it already has a relationship. It isn’t clear whether Monday’s settlement will pave the way for BofA to resume mortgage sales to Fannie.
Meanwhile, the bank also announced it would sell mortgage servicing rights on 2 million home loans totaling $306 billion in unpaid principal balance, around half of which are insured or owned by Fannie. The acquirers include Walter Investment Management Corp. (WAC), a Tampa, Fla.-based asset manager, mortgage servicer and originator, and Nationstar Mortgage Holdings (NSM).