Bank of America and Fannie Mae Settle

Bank of America has agreed to settle claims brought against it by the United States. The charges claimed against Bank of America include allegations that the corporation, and its subsidiary, Countrywide Financial Corp., improperly sold the government entity, Fannie Mae, mortgages which later became delinquent.

            

The issue began in 2008 before the financial crisis when Bank of America bought Countrywide, a lender known for granting precarious loans. Bank of America was first applauded for this as they were viewed as eliminating a negative actor from the mortgage market.  However, things went sour when Bank of America began selling off the risky defaulted loans it had acquired from Countrywide to Fannie Mae in order to make a profit. Loans which Fannie Mae says never should have been sold due to their risky and insecure nature. 

The settlement has Bank of America paying $3.6 billion to buy back $6.75 billion of loans which Countrywide sold to Fannie Mae from January of 2000 through December of 2008. 

To read the Press Release from Fannie Mae, click here. 

To read the settlement, click here.

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Mortgage Forgiveness Debt Relief Act Extended to 1/1/14

Great News!

Congress has extended The Mortgage Forgiveness Debt Relief Act of 2007 through January 1, 2014 by way of The American Taxpayer Relief Act of 2012 (more popularly known by the fear inducing name of The Fiscal Cliff Bill).

If you recall, The Mortgage Forgiveness Debt Relief Act made it so taxpayers did not have to report income gained from debt forgiveness on their principal residence should the debt be reduced by mortgage restructuring or in connection with a foreclosure.

The fate of the Act was in limbo for a while as it was set to expire on December 31, 2012 with no word as to if it would be renewed.

Here’s the provision from The American Taxpayer Relief Act of 2012 extending the Mortgage Forgiveness Debt Relief Act for another year:

“SEC. 202. EXTENSION OF EXCLUSION FROM GROSS INCOME OF DISCHARGE OF QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.

 (a) IN GENERAL.—Subparagraph (E) of section 108(a)(1) is amended by striking ‘‘January 1, 2013’’ and  inserting ‘‘January 1, 2014’’. (b) EFFECTIVE DATE.—The amendment made by this section shall apply to indebtedness discharged after December 31, 2012. "

To review the full Bill, click here. 

To review the White House's Press Release announcing the signing of the Bill into law, click here.