Fannie Mae and Bank of America (BOA) recently announced an $11.6 billion settlement to a long-standing dispute Monday. Fannie Mae, is a government-sponsored enterprise that buys mortgages and bundles them and then turns them into securities. It has been legally pressuring BOA to buy back a significant amount of non-performing loans issued between Jan. 1, 2000 and Dec. 31, 2008. The allegation is that these loans were poorly underwritten. The bulk of those mortgages came from Countrywide Mortgage, which was acquired by BOA in 2008.
As part of the settlement, BOA agreed to pay $1.3 billion to Fannie Mae to atone for alleged poor servicing on mortgages for Fannie Mae by delaying contacts with delinquent borrowers or failing to process foreclosures properly.
While the settlement is aimed at compensating Fannie Mae, there are implications for many BOA mortgage customers. In coming months, they will be notified that someone else will service their mortgages.
BOA, which has been pulling back from several areas of mortgage lending, got approval from Fannie Mae to transfer certain mortgage servicing rights to two firms, Nationstar Mortgage of Lewisville, Texas, and Green Tree, part of Walter Investment Management Corp .
Nationstar Mortgage, which specializes in mortgage servicing, agreed to acquire $215 billion in servicing rights from Bank of America for about $1.3 billion.
Executives of Nationstar, whose shares trade on the New York Stock Exchange, said in a conference call Monday they expect to take over the massive pile of mortgage servicing rights in a series of steps over the next nine months. In the meantime, BOA will continue to handle them.
Specialty servicers like Nationstar focus on customer outreach to try to reduce losses. But changing mortgage servicers can often be a challenging experience for bank customers.
Both Bank of America and Nationstar promised a smooth transition. Yeh, right!!!
“Servicing of accounts acquired will be transferred throughout the year in a manner that will ensure a smooth transition for our customers,” Nationstar told The Miami Herald in a statement.
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