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Bank of America Settles Alleged Role in Government Foreclosures

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By : Clark Raitz    99 or more times read
The Bank of America has reportedly agreed to settle a claim that it sold bad housing loans to mortgage finance firms that led to huge numbers of bank and government foreclosures in the U.S. The settlement involved the bank paying government-sponsored enterprises (GSEs) Freddie Mac and Fannie Mae around $2.8 million.

Following the announcement, the bank’s shares jumped by 4.5% as investors’ fear that the lender will be required to purchase back home loans worth billions was dissipated. The agreement, according to analysts, relieved the bank of its exposure to the GSEs. However, BofA will still have to face issues related to mortgages sold to private investment firms and individual investors, a possibility that has significance locally as some of those mortgages are believed to have led to hundreds of Indianapolis Real Estate foreclosures and foreclosed properties in various areas of the state and country.

According to some investors, a big number of the mortgage loans should not have been sold to private and individual investors, since most of them failed to meet underwriting requirements. This, some investors have argued, led to a spike in bank and government foreclosures in most U.S. markets. BofA has revealed that it paid $1.28 million to Freddie Mac in 2008 to put an end to claims associated with Countrywide-sold mortgages, a mortgage firm that BofA purchased during that year.

The bank added that it also paid Fannie Mae over $1.30 million to settle issues related to the more than 12,000 loans issued by Countrywide. Bank of America is expected to soon face additional liabilities pertaining to Indianapolis Real Estate foreclosures and other private investment-related mortgages. The bank also reported that it is expecting goodwill impairment worth around $2 billion in relation to its insurance and housing loans businesses.

Officials from the bank also stated that they do not expect additional reserves for more repurchase requests from the GSEs in the future in relation to their alleged role in bank and government foreclosures. They also stated that they will have an estimated $2.7 million worth of outstanding loan repurchase requests from the mortgage giants that were not covered in the settlement.
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