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The government has struck two big agreements with banks to help clean up the legal mess from the housing crisis. In one deal, 10 American banks agreed to pay a combined $8.5 billion to settle foreclosure abuse cases. Those banks include: Bank of America, JPMorgan Chase, CitiGroup and Wells Fargo. And Bank of America has also agreed to a separate deal. It will pay an additional $11.6 billion to mortgage giant Fannie Mae, in part to buy back some troubled loans.
As NPR's Yuki Noguchi reports that while these are important deals, there's still lots more work left to do.
YUKI NOGUCHI, BYLINE: Five years ago this week, Bank of America agreed to buy Countrywide, a one-time giant that underwrote many, many billions of dollars of troubled loans. Fannie Mae bought many of those loans and backed them with government guarantees. And that is how both Fannie and BofA wound up in a world of hurt.
KAREN SHAW PETROU: It was a failure of governance. It was a failure of regulation. It was a failure of deals that never should have been approved.
NOGUCHI: Karen Shaw Petrou is an analyst and managing partner at Federal Financial Analytics. She says the deal today goes a long way in resolving the bank's entanglements with Fannie Mae. BofA will pay Fannie nearly $5 billion in cash and compensatory fees and buy back an additional $6.75 billion worth of troubled loans.
PETROU: This was amongst the biggest of the disputes, if not the biggest.
NOGUCHI: Does this solve a lot of the problems that taxpayers have with Fannie Mae?
PETROU: No. No. No, we have billions to go there.
NOGUCHI: Petrou notes that while this deal helps, even with today's big payout, Fannie is nowhere near ready to pay off the tens of billions of dollars it owes taxpayers for a huge bailout.
Andrew Wilson is a spokesman for Fannie Mae. He says the deal curbs past and future losses for Fannie, and will prevent more foreclosures, because Bank of America agreed to sell a huge portfolio of its loans to outside companies that specialize in resolving troubled mortgages.
ANDREW WILSON: We've been able to have loans transferred to specialty servicers who can better work with homeowners to prevent foreclosure and reduce our losses.
NOGUCHI: Wilson says those specialty servicers do a better job of helping homeowners get loan modifications which, in turn, means more people stay in their homes.
But Bruce Marks disagrees. Marks is the CEO of the Neighborhood Assistance Corporation of America, a consumer advocacy group. He says those servicers often simply rush loans to foreclosure.
BRUCE MARKS: As bad as it was when Bank of America was servicing it, it's even worse with these specialty servicers. They are much faster for foreclosure on and they're no better in terms of getting modification from.
NOGUCHI: Marks dismisses all of the major efforts to make banks pay for their mortgage misdeeds; whether it's the $25 billion settlement last year between state regulators and banks, or the separate $8.5 billion agreement between 10 banks and the Federal Reserve and other bank regulators.
Those regulators, however, said today their settlement is designed to help homeowners get loan modifications or cash compensation for mishandled foreclosures, faster. Under that deal, nearly four million borrowers will get payments ranging from a few hundred dollars up to $125,000.
Karen Shaw Petrou, the financial analyst, says banks still face other mortgage-related litigation that could last another decade. And it's not just the past they're struggling to redefine.
PETROU: What do these banks do going forward, as they each begin to clean up the past? The strategic path for BofA, for Chase, for Citi, I think is an unanswered question.
NOGUCHI: Bank of America CEO Brian Moynihan said in a statement the company today is resolving some of its legacy issues. He will get a chance to discuss its future when the bank releases fourth-quarter results January 17th.
Yuki Noguchi, NPR News, Washington.