Bank of America Corp. said its $2.8 billion in accords with Fannie Mae and Freddie Mac, the government-owned firms pushing lenders to repurchase soured mortgages, was a “necessary step” in the housing recovery.
The biggest U.S. bank by assets announced Jan. 3 that it had “largely addressed” liabilities from the two mortgage-financing firms by paying Fannie Mae $1.5 billion and giving Freddie Mac $1.3 billion. The agreements may have shortchanged the U.S. government, which took over the two firms in a 2008 rescue, Representative Maxine Waters said late yesterday.
“Our agreements with Fannie Mae and Freddie Mac are a necessary step toward the ultimate recovery of the housing market,” Jerry Dubrowski, a spokesman for the Charlotte, North Carolina-based bank, said today in an e-mail. “We have taken a leadership role in responding to the housing crisis.”
Fannie Mae and Freddie Mac had been seeking to recoup losses on mortgages they bought that they say were created with faulty data, including information about borrowers’ income and house values. Bank of America received more than $21 billion in demands to buy back loans from the two firms. The bank surged 6.4 percent, its biggest gain in almost eight months, in New York trading on Jan. 3 after announcing the settlements.
The deal “may have been both premature and a giveaway,” said Waters, a California Democrat, in a statement. The accord may “amount to a backdoor bailout that props up the bank at the expense of taxpayers.”
The agreements resolved claims from McLean, Virginia-based Freddie Mac on 787,000 loans with unpaid principal of $127 billion sold through 2008 by Countrywide Financial Corp. The deal with Washington-based Fannie Mae resolved claims on about $4 billion in loans, Bank of America said.
Fannie Mae Chief Executive Officer Michael Williams said in a Jan. 3 statement that the agreement with Bank of America was “a fair and responsible resolution.”