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Bank Of America Writes Off $5Bn On Countrywide Financial

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The latest loss means Bank of America has written off about $10bn on its $4bn purchase of Countrywide Financial

Bank of America's has written off another $5bn (£3.2bn) for bad loans issued by its troubled sub-prime mortgage unit, Countrywide Financial. The latest loss means the bank has written off approximately $10bn on its $4bn purchase of Countrywide.

The largest part of the money settles a dispute with the US lending institutions Fannie Mae and Freddie Mac over loans they bought from Countrywide. The bank, which bought Countrywide in 2008, is paying $2.6bn to Freddie and Fannie and expects the total bill to top $3bn including potential future losses on repurchases from the government-sponsored enterprises.

The bank also said the collapse of the housing market would lead to a further $2bn hit to fourth-quarter results from the decline in the mortgage business. Over the previous two years Countrywide has cost Bank of America more than $5bn in write-downs . The bank's shares rose 5.6% in New York on news of the settlement.

Countrywide was the largest US seller of sub-prime loans and its portfolio has been exposed as one of the worst in the sector since the housing collapse. Freddie, Fannie and others have been trying to force lenders to buy back loans that may have been made with incorrect data on income and home values.

What a great buy Countrywide proved to be, bought for $4bn and lost so far about $10bn. Won't be long before it returns a profit.

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