BofA Freddie Mac Putbacks Resolved for 1¢ on $

By Barry Ritholtz - January 4th, 2011, 7:20AM
33 Comments

Bank of America settled numerous claims with Fannie Mae for an astonishingly cheap rate, according to a Bloomberg report.

A premium of $1.28 billion was paid to Freddie Mac to resolve $1 billion in claims currently outstanding. But the kicker is that the deal also covers potential future claims on $127 billion in loans sold by Countrywide through 2008. That amounts to 1 cent on the dollar to Freddie Mac.

Imagine if you had a $500,000 mortgage, and you got to settle it for $5,000 — that is the deal B of A appears to have gottem from Freddie Mac.

B of A also paid $1.52 billion to Fannie Mae to resolve disputes on $3.1 billion in loans (~49 cents on the dollar). They remain liable for $2.1 billion in repurchase requests, as well as any future demands from Fannie Mae.

My biggest complaint about the GSEs post government takeover is that they have been used as a back door bailout of the banks. This latest deal reconfirms that view.

Its a wonder B o A didn’t rally further than the 6.7% it surged yesterday .

Source: BofA Deal on Loan-Repurchase Demands Sets ‘Template’ for Banks
Dawn Kopecki and Hugh Son
Bloomberg, January 4, 2011
http://noir.bloomberg.com/apps/news?pid ... boobH0Ekv4

See also: Bank of America Buys Back $2.5 Billion in Mortgage Debt
BEN PROTESS AND ERIC DASH
NYT, JANUARY 3, 2011
http://dealbook.nytimes.com/2011/01/03/ ... bad-loans/

Bank of America Pays for Soured Loans
DAN FITZPATRICK
WSJ, January 4, 2011
http://online.wsj.com/article/SB1000142 ... 61336.html

http://www.ritholtz.com/blog/2011/01/bo ... eddie-mac/