A U.S. housing regulator is seeking at least $6 billion from Bank of America Corp. to settle civil claims the firm sold faulty mortgage bonds to government-backed finance companies Fannie Mae and Freddie Mac, according to a person with direct knowledge of the discussions.
The person requested anonymity because negotiations with the Federal Housing Finance Agency, which are continuing and may not result in a deal, are private. Larry DiRita, a spokesman for Charlotte, North Carolina-based Bank of America, declined to comment and the FHFA's Denise Dunckel said the regulator doesn't comment on pending litigation. The Financial Times reported on the proposed settlement amount yesterday.
The FHFA sued Bank of America and 17 other firms over faulty mortgage bonds two years ago in an effort to recoup some of the losses taxpayers were forced to cover when the U.S. took over the failing mortgage finance companies in the wake of the credit crisis. Fannie Mae and Freddie Mac, which are regulated by FHFA, have received $187.5 billion in federal aid since then.
JPMorgan Chase & Co., the biggest U.S. bank, would pay $4 billion to resolve FHFA claims as part of a $13 billion deal to end U.S. probes of its mortgage-bond sales, a person familiar with those talks said Oct. 19.
Bank of America, led by Chief Executive Officer Brian T. Moynihan, has sought to limit additional costs from faulty loans after its 2008 takeover of Countrywide Financial Corp. helped saddle the bank with more than $40 billion in expenses. The U.S. Justice Department last year filed a $1 billion fraud complaint against the bank, claiming the lender and its Countrywide unit generated thousands of defective mortgage loans and sold them to Fannie Mae and Freddie Mac.
The FHFA sued the banks in an effort to recover losses on about $200 billion in mortgage-backed securities. Bank of America and its subsidiaries created more than a quarter of those bonds, the most of any defendant, followed by JPMorgan's $33 billion. UBS AG, Switzerland's biggest bank, agreed to an $885 million settlement in July over $6.3 billion of mortgage-backed securities. Citigroup Inc. and General Electric Co. also reached settlements earlier this year.