Who won the Bank of America / Fannie feud? I want the answer to be “all of us,” but I guess it isn’t. Unlike Bank of America’s multi-front battle of deviousness with MBIA, which has spawned some genuine entertainment, BofA’s battle with Fannie has been conducted almost entirely in the boring trenches of actually flinging mortgages at each other. The story so far: back in the bad old days of “January 1, 2000 to December 31, 2008,” BofA/Countrywide sold approximately $1.4 trillion of mortgages to Fannie; in recent years Fannie has been figuring out that lots of those mortgages were badly underwritten, came with false reps and warranties, etc., and so it can demand that BofA repurchase them at par. It’s tried to do so on around $11bn of loans, and BofA’s reaction has been along the lines of (1) no and (2) “we’re so mad we’re going to stop selling you more mortgages,” which somewhat surprisingly to the casual observer actually seems to have been interpreted by both sides as a threat rather than a reward.
But today Fannie and BofA announced a settlement that would resolve all of those claims, as well as almost all future claims on the $297 billion of unpaid principal that remains on those $1.4 trillion of ’00-to-’08 mortgages.
The math here is a little funny. Let’s try to parse it: Read more »