Countrywide deal still haunts Bank of America
(MoneyWatch) Bank of America's troubles continue. After recent multi-billion dollar settlements with Fannie Mae and banking regulators, the financial giant expects to take a $2.7 billion hit to its profits when it reports fourth-quarter earnings later this month.
Still, B of A projects earnings to be "modestly positive," a testament to just how much money the bank is raking in. It will report fourth-quarter earnings on January 17.
The ballooning profit of the bank, which received bailouts after the financial crisis and which was accused of using the money to give bonuses to B of A execs, is not lost on homeowners struggling to make their monthly payments. According to the American Consumer Satisfaction Index, B of A is the only large U.S. bank to have a customer satisfaction level below its pre-recession number. In fact, the bank's ranking deteriorated 3 percent in December 2012.
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B of A announced Monday that it has reached an $11.6 billion settlement with Fannie over loans that the lender sold to the housing finance agency between 2000 and 2009. B of A bought Countrywide, a major provider of subprime loans during the housing boom, in July 2008, just before the financial crisis erupted. The acquisition has proved to be an ongoing headache for its owner. In June 2010, B of A agreed to pay $108 million to resolve federal allegations that Countrywide collected excessive fees from borrowers facing foreclosure before it was acquired by the bank.
The latest settlement includes a $3.6 billion cash payment to Fannie Mae and an agreement to repurchase $6.75 billion of the loans B of A sold to the agency. The bank also plans to make a cash payment to Fannie Mae in order to resolve all current and future claims surrounding past foreclosure delays. According to the bank, payments for both agreements will be covered by existing reserves and additional provisions recorded in the fourth quarter of 2012.
The agreements with Fannie Mae cover loans with an aggregate original principal balance of approximately $1.4 trillion -- about one-sixth of the national mortgage market -- and an aggregate outstanding balance (money still owed on the loans) of $300 billion.
The mortgage giant also plans to sell servicing rights on two million residential mortgages, totaling roughly $306 billion in aggregate unpaid principal loan balance. This includes 232,000 loans classified as first mortgage loans which are 60 or more days delinquent. The transfer will occur in stages over the course of 2013.
News of the agreement came on the same day the Office of the Comptroller of the Currency announced it had reached an $8.5 billion foreclosure settlement with 10 of the nation's top servicers, including Bank of America.
