Bank of America Settles with GSEs

January 3rd, 2011
in News, Banking

Reuters:   Bank of America Corp agreed to pay Fannie Mae and Freddie Mac $2.8 billion to settle claims that it sold the mortgage finance companies bad home loans, signaling that the bank may be closer to containing its outsized housing losses.

Follow up:

The news sent Bank of America shares up 5.5 percent to $14.08 in midday trading on the New York Stock Exchange. The deal triggered hopes that other banks may soon make similar settlements, and shares of Citigroup Inc and JPMorgan Chase & Co also rose.

Investors have feared for months that Bank of America would have to buy back billions of dollars of home loans it sold to investors at the height of the housing boom.


"I think 2011 will see the issue hopefully behind us," said Alan Villalon, a senior bank analyst at Chicago-based Nuveen Investments, which owns Bank of America shares.  Read more at Reuters......

Editor's notes:

1.  GEI News Blog highlighted the news that Bank of America initiated negotions with the government:  Bank of America Initiates Mortgage Negotiations (December 15, 2010).

2.  The Market Ticker has the opinion that this is a backdoor bailout for BAC because the losses for Fannie and Freddie will far exceed $2.8 billion.

3.  This is exactly the sort of backdoor bailout that former Goldman Sach executive John R. Talbott has warned about.

4.  See the latest GEI analysis of a potential trillion dollar fraud

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