8 Jan 2013

Bank of America to repay $US3.6b

6:30 am on 8 January 2013

Bank of America has agreed to pay a US government mortgage agency $US3.6 billion to settle claims relating to residential home loans.

In addition, it has agreed to buy back 30,000 mortgages for $US6.75 billion and pay a further $US1.3 billion in compensation to Fannie Mae.

Fannie Mae argued the bank sold it toxic debts and should be responsible for the losses it suffered as result.

Separately, ten big banks agreed to pay $US8.5 billion in compensation for mistakes in repossessing homes.

The banks include Bank of America, Citigroup, JP Morgan and Wells Fargo. The BBC reports they will pay $US3.3 billion directly to homeowners, some of whom should not have lost their homes.

Individual owners will receive up to $US125,000. Loan assistance and write-offs will make up the remaining $US5.2 billion.

The US mortgage market collapsed in 2008 after the housing bubble burst.

Fannie Mae and Freddie Mac lost more than $US30 billion and had to be bailed out by the federal government.

Since then, taxpayers have spent more than $US140 billion to keep them afloat.

Bank of America settled with Freddie Mac in 2011.