Fannie Mae said in a statement thisrnmorning that the loans to be repurchased had the potential to cause itrnsignificant future losses.  The bank willrnpay par plus accrued interest for a total of approximately $6.75 billion over andrnabove the cash payment.  Fannie Mae saidrnthis resolution will result in a substantial decrease in its outstandingrnrepurchase requests in the first quarter of 2013.</p

As part of the agreement Fannie Mae hasrnapproved the bank’s request to transfer servicing rights of close to onernmillion loans to specialty services. rnFannie Mae said this approval is consistent with its strategy to utilizernspecialized loss mitigation capabilities to reduce credit losses on high riskrnloans. </p

The bank remains liable for repurchasernobligations arising out of specified excluded defects and certain unresolvedrnservicing and indemnification issues as well as for some obligations related tornmortgage insurance. </p

“A favorable resolution of thisrnlong-standing dispute between Fannie Mae and Bank of America is in the bestrninterest of taxpayers,” said Bradley Lerman, Executive Vice President andrnGeneral Counsel of Fannie Mae.  “Fannie Mae has diligently pursuedrnrepurchases on loans that did not meet our standards at the time ofrnorigination, and we are pleased to have reached an appropriate agreement torncollect on these repurchase requests.” </p

The agreement required approval ofrnthe Fannie Mae’s conservator, the Federal Housing Finance Agency (FHFA).  Edward J. DeMarco, Acting Director of FHFArnsaid  “Thisrnis a major step forwardrnin resolvingrnissues from the past and providing greater certainty in the marketplace, which remain critical FHFA goals asrnconservator.  I am pleasedrnwithrnthe resolution achieved andrnthank everyone involvedrnfor their efforts.”</p

According to a statement released by Bank of America, the loans involvedrnwere originated by Countrywide Financial Corporation which the bank acquired inrn2008 and by the bank itself. The loans had an original principal balancesrntotaling 1.4 trillion and the unresolved claims by Fannie Mae for allegedrnbreaches of selling representations and warranties totaled $11.2 billion ofrnunpaid principal balances as of September 30, 2012.  Payments required by the agreement arernexpected to be covered by the Bank’s existing reserves and an additional $2.5rnbillion (pretax) in representations and warranties provision recorded in thernfourth quarter of 2012.  The bank saidrnthat the actions described above are expected to reduce its pretax income by approximatelyrn$2.7 billion in the fourth quarter of 2012. </p

Bank of America also announced that it had signed definitive agreements withrntwo different counterparties to sell the servicing rights on approximately twornmillion residential mortgage loans serviced for Fannie Mae, Freddie Mac, GinniernMae, and private label securitizations, with an aggregate unpaid principalrnbalance of approximately $306 billion.   Approximately 232,000 of the loans are classifiedrnas 60+ day delinquent. </p

 “As we enter 2013, we sharpen ourrnfocus on serving our three customer groups and helping to move the economyrnforward,” said Bank of America Chief Executive Officer Brian Moynihan.rn”Together, these agreements are a significant step in resolving our remainingrnlegacy mortgage issues, further streamlining and simplifying the company andrnreducing expenses over time.”

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