According to the WSJ, Fannie Mae spent $500 million to buy the servicing rights to a big chunk of the "seven million loans still causing the most problems." Although the $500 million is a paper loss to BofA, in that the rights were "originally worth more," it looks like BofA is still getting a good deal because the portfolio's "value is expected to deteriorate further."

In fact, the deal is worth much more than $500 million to BofA, because getting rid of those servicing rights lifts a huge cost burden off BofA's shoulders. And if securitized loans are involved, which they most likely are, the sale also limits the BofA's potential liability to investors for its current servicing violations. Finally, the $500 million is surely more than the servicing rights are worth in an arms-length transaction. How do we know? Beyond the comment that the loans are expected to "deteriorate further," the goal of the intervention can only be to fix Bank of America's capital structure, which is easier for the government to do if it overpays for the rights.