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| Bank of America to pay Fannie Mae billions to settle mortgage claims | Bank of America to pay Fannie Mae billions to settle mortgage claims |
| (about 1 hour later) | |
| Bank of America has agreed to pay US government mortgage agency Fannie Mae $3.6bn (£2.2bn) to settle claims relating to residential home loans. | Bank of America has agreed to pay US government mortgage agency Fannie Mae $3.6bn (£2.2bn) to settle claims relating to residential home loans. |
| In addition, it has agreed to buy back 30,000 mortgages for $6.75bn, and pay a further $1.3bn in compensation. | In addition, it has agreed to buy back 30,000 mortgages for $6.75bn, and pay a further $1.3bn in compensation. |
| Fannie Mae argued that the bank had sold it toxic home-loan debts between 2000 and 2008. | Fannie Mae argued that the bank had sold it toxic home-loan debts between 2000 and 2008. |
| The agency supports the US mortgage market, which lapsed into turmoil in 2008 as the housing bubble imploded. | The agency supports the US mortgage market, which lapsed into turmoil in 2008 as the housing bubble imploded. |
| In the run-up to the financial crisis of 2007-8, home loans grouped together and sold on as investments became increasingly popular. | In the run-up to the financial crisis of 2007-8, home loans grouped together and sold on as investments became increasingly popular. |
| When the underlying mortgage holders were unable to repay their debts, the investments plummeted in value, with disastrous consequences for banks all over the world. | When the underlying mortgage holders were unable to repay their debts, the investments plummeted in value, with disastrous consequences for banks all over the world. |
| Freddie Mac is the other government mortgage agency. The two firms lost more than $30bn, partly because of their investments in the subprime mortgages, and were bailed out by the US government. | Freddie Mac is the other government mortgage agency. The two firms lost more than $30bn, partly because of their investments in the subprime mortgages, and were bailed out by the US government. |
| Since the rescues, US taxpayers have spent more than $140bn to keep the firms afloat. | Since the rescues, US taxpayers have spent more than $140bn to keep the firms afloat. |
| Bank of America settled with Freddie Mac in 2011. | Bank of America settled with Freddie Mac in 2011. |
| 'Significant step' | 'Significant step' |
| The agreement brings to an end a long-running dispute between Fannie Mae and Bank of America. | The agreement brings to an end a long-running dispute between Fannie Mae and Bank of America. |
| "A favourable resolution of this long-standing dispute between Fannie Mae and Bank of America is in the best interest of taxpayers," said Bradley Lerman at Fannie Mae. | "A favourable resolution of this long-standing dispute between Fannie Mae and Bank of America is in the best interest of taxpayers," said Bradley Lerman at Fannie Mae. |
| The company said the loans "did not meet our standards at the time of origination, and we are pleased to have reached an appropriate agreement to collect on these repurchase requests." | The company said the loans "did not meet our standards at the time of origination, and we are pleased to have reached an appropriate agreement to collect on these repurchase requests." |
| The agreement covers loans worth about $1.4tn, with outstanding balances of $300bn. | The agreement covers loans worth about $1.4tn, with outstanding balances of $300bn. |
| Bank of America said the settlements were "a significant step in resolving our remaining legacy mortgage issues". | Bank of America said the settlements were "a significant step in resolving our remaining legacy mortgage issues". |
| In October, the US government sued the bank for alleged mortgage fraud, accusing subsidiary Countrywide Financial of selling thousands of toxic home loans to Fannie Mae and Freddie Mac. | |
| Earlier in the month, it took similar action against the banks Wells Fargo and JP Morgan Chase. | Earlier in the month, it took similar action against the banks Wells Fargo and JP Morgan Chase. |
| In October, JP Morgan was sued for allegedly defrauding investors who lost more than $20bn on mortgage-backed securities sold by Bear Stearns. | In October, JP Morgan was sued for allegedly defrauding investors who lost more than $20bn on mortgage-backed securities sold by Bear Stearns. |
| JP Morgan, which bought the investment bank in March 2008, said the allegations related to actions at Bear Stearns prior to its takeover. | JP Morgan, which bought the investment bank in March 2008, said the allegations related to actions at Bear Stearns prior to its takeover. |
| In the same month, Wells Fargo was also sued by federal authorities for alleged mortgage fraud. | In the same month, Wells Fargo was also sued by federal authorities for alleged mortgage fraud. |