(
)
Bank of America is getting blasted with accusations of a “backdoor bailout” for its $2.8 billion settlement with Fannie Mae and Freddie Mac over billions of bad mortgages.
Fannie and Freddie, which are wards of the government, accepted pennies on the dollar to settle a dispute over billions of faulty mortgages the bank sold to the pair during the housing bubble.
Bank of America breathed a sigh of relief on Monday after the cost was far less than investors feared, sending its shares up as much as 6.4 percent.
But detractors on Wall Street and in Washington denounced the deal as another taxpayer buyout for a bank that weathered the financial crisis only with the help of a $45 billion government lifeline.
“I’m concerned that the settlement between Fannie Mae and Freddie Mac and Bank of America over misrepresentations in the mortgages BofA originated may amount to a backdoor bailout that props up the bank at the expense of taxpayers,” Congresswoman Maxine Waters (D-Calif.) said in a statement yesterday.
Analysts estimate the taxpayer bill for propping up troubled institutions Fannie and Freddie could hit a whopping $150 billion, while the entities’ recent settlements with banks over bad mortgages represent a drop in the bucket.
“If Fannie and Freddie had really pushed hard on this settlement, it would have really caused problems for BofA,” Edward Pinto, resident fellow at conservative Washington think tank American Enterprise Institute, told The Post.
The outrage stems from BofA’s agreement to pay just $1.28 billion to Fannie and $1.52 billion to Freddie to resolve a dispute over loans purchased between 2005 and 2007 that the pair claims were improperly created.
According to critics, the BofA settlement was struck for a mere fraction of the amount the bank should be forking over to Fannie and Freddie.
“This [settlement] is a standing subsidy that has to be worth $10 billion or $15 billion for [BofA],” Christopher Whalen, the founder of Institutional Risk Analytics, told The Post.
BofA became the largest mortgage lender after it agreed to purchase troubled mortgage giant Countrywide Financial in 2008. It’s mostly loans originated by Countrywide that are viewed as the biggest problem for Fannie and Freddie.
BofA’s sweetheart deal with the mortgage giants comes a week after Ally Financial — the entity formerly known as GMAC, which is more than half owned by the government — agreed to shell out $462 million to Fannie to settle repurchase claims.
Some critics say Bank of America is being rewarded for buying Countrywide and troubled investment bank Merrill Lynch, both of which collapsed during the financial crisis.
“The real juice here is that BofA did the government a favor. They bought Countrywide and Merrill Lynch without a bankruptcy and saved the system, and this [mortgage settlement] is a quid pro quo,” Whalen said. mark.decambre@nypost.com