Fannie Mae and Freddie Mac demand that Bank of America buy back delinquent loans

Posted on: August 19th, 2011 by Steve Larson

Bank of America Corp. said in its quarterly filing on August 4 that Fannie and Freddie were demanding that it buy back delinquent loans “in numbers that were not expected.”  Bank of America agreed in January to pay the mortgage finance giants $3 billion to settle such claims, an amount it said at the time appeared adequate.

Bank of America in June announced an additional $20 billion in charges related to home loans written by Countrywide Financial Corp., the aggressive Calabasas lender it acquired in 2008.  But New York Attorney General Eric Schneiderman has urged a state court judge to reject as inadequate a key settlement agreement: a proposed $8.5 billion payment to investors in mortgage bonds not backed by Fannie and Freddie.

Investors spooked by the prospect of still more mortgage losses drove Bank of America shares down 66 cents, or 7.5%, to $8.17 on August 5, after a 7.4% fall on August 4.