By Bernie Becker - 01/07/13 02:37 PM EST
Bank of America announced Monday that it will pay housing giant Fannie Mae some $10 billion due to mortgage loans issued by a subsidiary of the bank.
The bank will pay Fannie Mae $3.6 billion in the settlement, and will also buy back some $6.75 billion in loans that it sold to the housing group.
Federal authorities have charged that Countrywide, which Bank of America purchased in 2008, issued dicey mortgage loans, but led Fannie Mae and another housing giant, Freddie Mac, into thinking those loans weren’t risky.
Bank of America also announced Monday that it will unload $306 billion worth of mortgage loans to other outfits, and the bank’s chief executives said reducing Bank of America’s focus on the home mortgage market would help its long-term health.
“As we enter 2013, we sharpen our focus on serving our three customer groups and helping to move the economy forward,” Brian Moynihan, the CEO, said in a statement. “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.”
The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, said in a separate statement on Monday that the settlement would help put the mortgage market on firmer footing.
“This is a major step forward in resolving issues from the past and providing greater certainty in the marketplace, which remain critical FHFA goals as conservator," said Edward DeMarco, the acting director at FHFA.
The House Ethics Committee also decided late in 2012 to end its investigation into a Countrywide program that gave more affordable mortgages to lawmakers and other prominent officials.
Bank of America said Monday that the settlement is expected to roll back its fourth-quarter earnings by some $2.7 billion.
This post was updated at 10:20 a.m.