At the cusp of the housing crash, Bank of America bought Countrywide, a lender that did both good and bad loans. Then Bank of America turned around and sold these loans to you and me — by selling them to Fannie Mae. I’ll explain.
Fannie Mae is the nickname for FNMA (Federal National Mortgage Association.) FNMA buys loans from banks and other mortgage lenders. It is owned primarily by American taxpayers. The U.S. government took 79.9% stake in Fannie Mae and its brother, Freddie Mac, in September 2008.
Fannie Mae didn’t like being sold a boatload of bad loans by Bank of America and cried, “FOUL!” There’s been an ongoing argument ever since. But today, Bank of America announced a settlement agreement with FNMA.
Bank of America has agreed to pay Fannie Mae $3.6 Billion and buy back 30,000 mortgage loans that were originated between January 2000 and December 2008, the years of the infamous “bad credit, no problem” loans.
This settlement and buy-back is in the best interest of taxpayers, because those risky and rotten loans are now back in the hands of BOA.
Now that Bank of America has that regrettable purchase-and-resell issue resolved, they can get on with the business of making more money. In spite of the settlement, they project a modest profit coming up.
So, today’s news is good news for everyone involved.