Bank of America announced on Monday that it had reached a $10.3 billion settlement with Fannie Mae over the bank’s sale of bad home loans to the mortgage lender that resulted in a government bailout.
As part of the deal, Bank of America will pay $3.6 billion in cash, as well as repurchase 30,000 questionable mortgages for $6.75 billion. The loans, which are likely to result in losses for the bank, were bundled into mortgage-backed securities purchased by Fannie Mae.
The bad loans, which had an original value of $1.4 trillion, were originated between 2000 and 2008 by Countrywide Financial, a subprime and mortgage lender purchased by Bank of America in 2008.
As the bank attempts to distance itself from troublesome home mortgages, it also announced that it would sell the servicing rights on two million other loans totaling $306 billion. The bank will also pay $1.3 billion to Fannie Mae to resolve any servicing issues.
“As we enter 2013, we sharpen our focus on serving our three customer groups and helping to move the economy forward,” Bank of America CEO Brian Moynihan said. “Together, these agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time.”