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Bank of America in $3.6bn mortgage deal

Jan 07 2013 16:53 Reuters

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New York - Bank of America said it will pay $3.6bn to Fannie Mae to settle claims related to residential mortgage loans for the nine years to the end of 2008.

The bank also entered into agreements with Nationstar Mortgage Holdings and Walter Investment Management to sell about $306bn of residential mortgage servicing rights. 

The rights allow banks to earn fees from mortgage investors in exchange for collecting home loan payments from borrowers.

As part of the settlement with Fannie Mae, the bank will repurchase $6.75bn of residential mortgage loans sold to the government agency.

BofA said the settlement will reduce its fourth-quarter pretax income by about $2.7bn.

Reuters reported on Friday that the bank was in talks to sell collection rights on $300bn of mortgages to lessen its exposure to huge losses from its acquisition of Countrywide Financial Corporation in 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," Chief Executive Brian Moynihan said in a statement.

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