The new agreement does not apply tornany of the other four banks involved in the original settlement.  It would allow BOA to avoid paying $350rnmillion in penalties and the back half of the $1 billion FHA claim referencedrnabove.  If, as it appears, the $350rnmillion is the portion of the $2.25 billion which is also structured as arnback-end payment it would seem that the bank is being proactive in concludingrnremaining details of the settlement.  Manyrnof the write-downs will be made on loans originated by Countrywide FinancialrnCorp., which Bank of America acquired in 2008, and then packaged intornsecurities. BOA will also reduce balances on loans it owns.</p

The Journal saidrnthat the new arrangement is likely to generate criticism from investors who ownrnthe securities backed by the mortgages that would be reduced and fund managersrnwho feel it is unfair for banks which were servicing loans for investors to usernthose loans to settle problems they themselves caused  It quoted one fund director who would notrnspeak directly about the agreement as saying, “To ask investors to pay forrnbanks’ fines in any form seems inappropriate and incorrect-we have very seriousrnissues with that.”</p

An Obama administration officialrnhowever said that principal reductions will be done only when there is arnbenefit to investors; that is the principal reduction would cost less than arnforeclosure, and the reduction would be done in compliance with investorrncontracts. 

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