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Tag: Freddie Mac

  • Bank of America Settles Hefty $9.3M Lawsuit

    Bank of America Settles Hefty $9.3M Lawsuit

    Bank of American took quite a hit from the Federal Housing Finance Agency in a lawsuit that ended in a $9.33 million dollar lawsuit.

    The FHFA, which is the agency that oversees the operations of Fannie Mae and Freddie Mac, sued Bank of America as one of the 18 entities they sued for misrepresenting mortgages that were backed by Fannie and Freddie.

    The settlement will take quite a chunk out of the bank’s first quarter 2014 income by $3.7 billion, but will free the bank from other pending FHFA lawsuits that threatened to do even more damage.

    Bank of America is only 1 out of the 18 banks that the FHFA sued over soured mortgage securities, beginning in 2011. Many of those banks that were sued have settled, according to AP.

    This fiasco happened during the housing bubble that burst and led to the 2008 government bailout of Fannie Mae and Freddie Mac. The government agencies don’t make the loans, but they buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors.

    Bank of America says it will split the settlement into a cash payment of $6.3 million and a large securities purchase of $3 million.

    According to Forbes, Bank of America said of the settlement, “The FHFA settlement resolves one of the most significant remaining pieces of RMBS (Residential Mortgage Based Securities) securities litigation facing the company. With this settlement, Bank of America has now resolved approximately 88 percent of the unpaid principal balance of all RMBS as to which RMBS securities litigation has been filed or threatened for all Bank of America-related entities.”

    Bank of America wasn’t only dishing it out for Fannie and Freddie. They, along with former chief executive Kenneth Lewis, also recently reached a settlement to end investigations into their somewhat shady acquisition of Merrill Lynch & Co in 2008. That one cost them $25 million, with the bank paying $15 million and Lewis paying $10 million.

    In that particular case, they are accused of not disclosing Merrill Lynch & Co’s losses and bonuses before the deal was closed. Lewis is now barred from serving as an officer or director of a public company for 3 years.

    Image Via Wikimedia Commons

  • Mortgage Rates Fall Significantly, Surveys Show

    Mortgage rates fell to one of the most extreme lows this year during the week ending November 21. According to a national weekly survey by Freddie Mac, results concluded that declines in manufacturing growth (industrial products) lowered the rates by 0.1% last month.

    Freddie Mac chief economist Frank Nothaft spoke about the lowered rates after the results of said survey were released this week, indicating that the average rate for a 30-year fixed-rate loan was lowered to 4.22% this week. Last week, that same popular mortgage product was rated at 4.58%.

    Freddie Mac’s survey showed that the average rates on a 15-year fixed-rate loan were reaching 3.35% last week; this week, the 15-year term rates fell to 3.27%.

    Findings showed a downturn in the inflation rate, as well. Nothaft said that the ‘consumer price index saw its smallest increase since October of 2009.’ The year 2013 had seen mostly a rise in the rates, beginning in January with the 30-year fixed-rate loan being 3.34%. By August, that number had reached a high of 4.58%, according to CNN.

    Bankrate.com, however, had slightly varied results from Freddie Mac’s. Their findings showed that this week, the 30-year fixed-rate loan fell to 4.39%, whereas the previous week it was at 4.48%. Their 15-year fixed-term rates were also reduced, from last week’s 3.49% to 3.27% this week. They went on to show that adjustable mortgage rates – 5-year and 7-year terms – were also in decline this week.

    On May 1, the 30-year term fixed-rate was 3.52%, which would cost a borrower $900 a month for a $200,000 mortgage. With the current rate, that same loan would require a monthly payment of $1,000.

    The mortgage rates are not expected to change significantly anytime soon; the decline is presumed to have been caused by Janet Yellen’s comments last week at a Senate Banking Committee hearing. Yellen is the imminent replacement for current Fed chairman Ben Bernanke, whose term ends in January. According the International Business Times, Yellen has been clear in her support of the policies Bernanke has implemented during his time in office. She has indicated the she believes the ‘benefits of the bond-buying program continue to outweigh the costs, and the best way for the Fed to help overcome income inequality is through recovery of the job market.’

    No word yet on strategies for implementing that.

    Main image courtesy @federalreserve via Twitter.

  • 30-Year Mortgage Rates Continue To Hit New Lows, According To Freddie Mac

    30-year fixed-rate mortgages are averaging record-breaking lows, according to Freddie Mac. The company has released results of its Primary Mortgage Market Survey showing that a streak of lows is continuing.

    According to the survey, the mortgages averaged 3.49%, which is over a full percentage point lower than a year ago, when it averaged 4.55%.

    Mortgage rates

    Frank Nothaft, vice president and chief economist at Freddie Mac said,”Market concerns over the strength of the economic recovery brought long-term Treasury yields to new lows this week allowing fixed mortgage rates to reach record levels.”

    “The Conference Board Leading Economic Index showed the largest monthly decline in June since September 2011,” he added. “Existing home sales fell to 4.36 million homes (annualized) in June and represented the slowest pace since October 2011. Similarly, new home sales fell in June to their lowest level since January of this year.”

    The 15-year fixed-rate mortgage also set a record low, according to the survey, falling to 2.8%. A year ago, they averaged 3.66%.

    Meanwhile, 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) averaged 2.74% for the week, down from 3.25% last year. 1-year Treasury-indexed ARM rates averaged 2.71. A year ago, they were averaging 2.95%.

    You can get a closer look at the survey results here.