Housing Lenders to Pay Billions for Blowing Bubble; 10 Banks Hit for Bad Loans, Faulty Foreclosures

The Washington Times (Washington, DC), January 8, 2013 | Go to article overview

Housing Lenders to Pay Billions for Blowing Bubble; 10 Banks Hit for Bad Loans, Faulty Foreclosures


Byline: Tim Devaney, THE WASHINGTON TIMES

The U.S. banking industry suffered two big hits Monday stemming from the collapse of the housing bubble, with 10 banks and mortgage lenders agreeing to pay $8.5 billion in a settlement with federal regulators, while Charlotte, N.C.-based Bank of America agreed to a separate settlement with Fannie Mae over bad housing loans that its controversial lending subsidiary sold to the federal housing finance giant.The 10 major banks and mortgage lenders, including Bank of America Corp., stood accused of prematurely foreclosing on homeowners and agreed to the settlement worked out with the Federal Reserve and Office of the Comptroller of the Currency.Bank of America agreed to pay $10.3 billion in a settlement with Fannie Mae over bad loans that its Countrywide subsidiary sold the government-backed mortgage giant during the height of the housing bubble, the byproducts of a loose mortgage system that eventually flooded the market with bad housing loans.Bank of America will pay Fannie Mae $3.55 billion in penalties and also spend $6.8 billion to repurchase about 30,000 of the most questionable home loans. In 2011, it settled a similar complaint with Freddie Mac, Fannie Mae's sister agency.Bank of America has been on the hook for the suspicious loans made by high-flying mortgage originator Countrywide Financial Corp., which it purchased in 2008. The loans were made between 2000 and 2008 Together, these agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time, Bank of America CEO Brian Moynihan said in a statement.Investors took the Bank of America news in stride - a sign that many believe the bank was putting the worst of the global financial crisis behind it. The bank's stock was essentially flat for the day.Bank of America was one of the 10 lenders also caught up in the settlement with federal regulators over the rules and processes they used in foreclosing on borrowers who fell behind on mortgage payments during the Great Recession. In April 2011, regulators began investigating their foreclosure practices during 2009 and 2010.Regulators complained that Bank of America, along with Citigroup Inc., JPMorgan Chase & Co., Wells Fargo & Co. and six others, had foreclosed on homes too early by mishandling paperwork and skipping necessary steps they were supposed to take.These major banks will pay $3. …

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