Tuesday, February 11, 2014

BofA could pay $7.4B in FHFA dispute, according to one estimate

Bank of America might end up paying more than $7 billion to end a legal dispute with the Federal Housing Finance Agency, The Wall Street Journal reported Tuesday.

The FHFA, which oversees mortgage giants Fannie Mae and Freddie Mac, sued Bank of America and other lenders in 2011 over the sale of mortgage-backed securities. The bank's Countrywide and Merrill Lynch units were among those sued by the FHFA.

Seven settlements have been reached, including with Ally Financial, Citigroup and JPMorgan Chase & Co. A $1.25 billion settlement with Morgan Stanley was announced last week.

Of the banks that have recently settled, the amounts equate to roughly 12 to 13 percent of the original principal balance of securities sold to Fannie Mae and Freddie Mac, The Wall Street Journal said. Based on those percentages, Bank of America's payout to resolve the lawsuits, including those stemming from Merrill Lynch and Countrywide, would total about $7.4 billion, the newspaper estimated.

In October, Fitch Ratings estimated Bank of America's payout at $5 billion to $8 billion should the bank decide to settle.

A bank spokesman could not be immediately reached for comment.

Last month, the FHFA said it had recovered nearly $8 billion in settlements related to the 2011 lawsuits, which alleged securities law violations and, in some cases, fraud.