Citing Flawed Valuations, Bank of America Repurchases
$330 Million in Freddie Mortgages
Bank of America will pay Freddie Mac $330 million dollars to buy back allegedly flawed home loans, Bloomberg reported on May 23.
Dan Frahm, a spokesman for the Charlotte, N.C.-based Bank of America, told Bloomberg that the bank has agreed to the repurchase “because the valuation method used at origination did not meet the investor’s technical requirements.” Frahm noted the flaws have since been repaired.
Bank of America CEO Brian T. Moynihan is looking to mitigate further losses after incurring more than $42 billion dollars in costs related to defective home loans, Bloomberg reported. Buyers and insurers of mortgage securities have insisted on compensation for faulty debt created by Countrywide Financial Corp., which the bank purchased in 2008, at a time when the institution was the nation’s largest residential lender.
Freddie Mac and Bank of America announced a $1.28 billion settlement in January 2011 resulting from bad loans sold through 2008 by Countrywide. Other transactions between the entities were not included in the deal, and a portion of the loans covered by Freddie’s latest announcement had more recent origination dates.
Bank of America’s backlog of pending requests for refunds on shoddy loans reached a record $16.1 billion in the first quarter 2012 as the dispute widened between BOA and Fannie Mae, which ceased accepting new loans from Bank of America in January, according to the Bloomberg report.
“It is also unclear if this is a one-time issue or a process that will be revisited at some regular interval,” the Barclays analysts told Bloomberg. “Another concern would be whether similar buyouts are being considered or being implemented at Fannie Mae.”
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