facebook
twitter
rss
account
search
search
 

Countrywide to cost BofA 30 times its purchase price

Dec. 27, 2013 at 2:23 PM   |   Comments

| License Photo
CHARLOTTE, N.C., Dec. 27 (UPI) -- Bank of America could pay 30 times what it paid for Countrywide Financial Corp. in fines and fees connected to the deal, the U.S. bank's figures show.

BofA has already paid $50 billion in fines and legal expenses connected to the nation's biggest mortgage lender, which it purchased for $2.5 billion in 2008, the Los Angeles Times reported Friday.

The bank, meanwhile, has said it projected an additional $23 billion maybe required to cover additional penalties connected to Countrywide's business and that is above and beyond what the bank has already put aside for legal costs, which are confidential, the Times said.

Federal prosecutors are seeking $864 million for fraud involving bundled high-risk mortgages Countrywide sold to the Federal Home Loan Mortgage Corp., known as Freddie Mac, and the Federal National Mortgage Association, known as Fannie Mae.

That case is over, except for size of the penalty which has yet to be determined, the Times said Thursday.

Dick Bove, bank analyst at Rafferty Capital Markets called the penalty in that case, "chump change."

The bank, however, said it may appeal the case.

Lawyers for BofA and for the American International Group, Inc., have begun the discovery phase in a case in which AIG is seeking $10 billion in compensation to cover losses incurred by purchasing Countrywide mortgages.

The regulator for Fannie Mae and Freddie Mac has also filed a lawsuit against BofA, one of 18 filed by the Federal Housing Finance Agency in 2013. Sources said the FHFA could seek as much as $6 billion.

An $8.5 billion settlement with Bank of New York Mellon, representing some of Wall Street's largest investors, such as Goldman Sachs and BlackRock, is waiting for final approval from the courts.

In addition, it has been estimated that BofA has put up to $11 billion aside for legal costs. Although the size of that account is not specifically known, BofA has said it expects to pay $5.1 billion in additional legal costs on top what it has set aside.

"They're more than half done. But are they 60 percent done, 55 percent done? That's hard to tell," said Erik Oja, a banking analyst at S&P Capital IQ.

"It was one of the worst deals done in the height of the property fiasco. This is a deal they went into because they were greedy ... where they saw the upside of the shady practices Countrywide was engaged in," said law professor Jeffrey Manns at George Washington University.

© 2013 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
Recommended UPI Stories
Featured UPI Collection
trending
Celebrity Couples of 2014 [PHOTOS]

Celebrity Couples of 2014 [PHOTOS]

Most Popular
1
Northrop Grumman developing reusable space plane for lifting spacecraft into orbit
2
Embraer refining KC-390 transport
3
Navy to test Lockheed Martin's FORTIS exoskeleton
4
Slovakia plants seed in Ukrainian gas sector
5
Final builder sea trials for Australian landing helicopter dock ship
Trending News
Video
x
Feedback