Auld lang sigh

3 January 2011 By Antony Currie Follow @AntonyMCurrie

The bank s shares jumped 5 pct on a $3 bln deal to buy back bad home loans from Fannie and Freddie and draw a line under the exposure. The cost is lower than outsiders worstcase scenarios and BofA s own expectations. But there s plenty of mortgage risk still on BofA s books.

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Bank of America announced on Jan. 3 that it had reached an agreement with Fannie Mae and Freddie Mac to settle substantially all claims relating to mortgages sold by the end of 2008 by Countrywide to the two agencies. Bank of America, which bought Countrywide in 2008, paid $1.28 billion to Freddie Mac and $1.34 billion to Fannie Mae.

All in, BofA expects to take a provision for the fourth quarter of 2010 of around $3 billion related to the payments and will book a goodwill impairment charge of around $2 billion in its Home Loans and Insurance business which now houses Countrywide.

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