U.S. Banks Settle Foreclosure Abuses for $8.5 Billion, Indexes Ease

Nichole Harper
07 Jan, 2013
New York City

Stocks were on the defensive on Wall Street after broader indexes gained to a five-year high on Friday. Bank of America agreed to settle claims with Fannie Mae for $10 billion and ten banks agreed to pay $8.5 billion to end foreclosure abuse claims.

[R]12:05 PM New York – Stocks were on the defensive on Wall Street after broader indexes gained to a five-year high on Friday. Bank of America agreed to settle claims with Fannie Mae for $10 billion and ten banks agreed to pay $8.5 billion to end foreclosure abuse claims.[/R]

Stocks turned lower after reaching a five-year high in Friday’s trading but banks were in early advance.

Bank of America gained after it agreed to settle for $10 billion mortgage loans claims from the government agency Fannie Mae from the loans at its subsidiary Countrywide Financial.

Bank agreed to pay the agency $3.6 billion and buy back $6.75 billion in loans that its Countrywide unit sold to Fannie Mae from Jan 1, 2000 through Dec 2008.

Separately, federal regulators and ten U.S. banks agreed pay $8.5 billion for foreclosure abuses and flawed loan modifications.

Ten lenders include JP Morgan Chase, Bank of America, PNC Financial, Citibank, SunTrust Banks, MetLife, Sovereign Bank, U.S. Bancorp, Wells Fargo and Aurora Bank FSB.

About $3.3 billion of the payment would go to troubled borrowers that may lower loan principal balances and pay as much as $125,000 to eligible homeowners.

Office of Comptroller said about 495,000 borrowers applied by the end of 21012 to review their foreclosure histories examined for missteps after regulators sent letters to 4.4 million claimants.

European markets declined across the region but banks traded higher on the eased capital and liquidity requirements from Basel Committee.

Markets in Asia traded lower after the Nikkei in Tokyo declined after rising for four days in a row. The Nikkei declined 0.8% and the index in Hong Kong was nearly unchanged and the Sensex in Mumbai dropped 0.5%.

Stocks in Review

Amazon.com Inc ((AMZN)) gained 3% or $8.29 to $267.42 after positive comments from a broker citing higher global online sales.

Athenahealth, Inc. ((ATHN)) gained 2.8% or $2.18 to $78.53 after the clinical software provider agreed to acquire Epocrates Inc. for $11.75 per share or $293 million in cash.

Bank of America Corporation ((BAC)) added 7 cents to $12.18 after the bank agreed with Fannie Mae to resolve outstanding mortgage loans related claims. The bank will make cash payment to Fannie Mae of $3.6 billion to settle mortgage claims that were linked to loans issued by its subsidiary Countrywide Financial.

Illumina, Inc. ((ILMN)), the life science tools maker agreed to acquire Verinata Health, Inc. for $350 million plus up to $100 million in milestone payments up to 2015.

The stock dropped 7% after Swiss based Roche Holding AG said that it may no longer be interested in the company after shareholders rejected its revised offer of $51 a share from the previous $44.50 a share.

Nationstar Mortgage Holdings Inc. ((NSM)) surged 16.7% or $5.57 to $38.80 after the non-banking company agreed to acquire approximately $215 billion in residential mortgage servicing rights, and certain other assets from Bank of America. The purchase price for the mortgage service rights is nearly $1.3 billion.

Walgreen Co ((WAG)) gained 60 cents to $37.75 after Jeffries analyst raised its outlook on the stock and said it may get a boost from the flu season and the latest healthcare overhaul.