Bank of America to pay US govt $3.6bn to settle mortgage claims

<p>The Bank of America has settled with Fannie Mae over claims it sold bad mortgage loans.</p>

The Bank of America (BoA) has agreed to pay the US government mortgage agency Fannie Mae $3.6 billion (£2.2 billion) after reaching a settlement on mortgage loans sold by the bank and its Countrywide arm to the agency ahead of the financial crisis in 2008.

Furthermore, the institution has agreed to buy back 30,000 mortgages for $6.7 billion and pay an additional $1.3 billion in compensation.

In the run-up to the credit crunch in 2007 and 2008, home loans grouped together and sold on as investments were popular, but when the underlying mortgage holders could not meet their debt repayments, the value of these investments fell, plunging banks all over the world into crisis.

Fannie Mae argues the BoA sold it bad home loan debts between 2000 and 2008 and this agreement follows a similar deal made with fellow government agency Freddie Mac, which reached a settlement with the bank in 2011.

At 14:40 GMT on the New York Stock Exchange, BoA shares opened on the right foot, rising by 0.2 per cent to $12.15 per share.

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