Bank of America to pay Freddie Mac $404 million in mortgage settlement
WASHINGTON -- Bank of America Corp. agreed to pay $404 million to Freddie Mac to settle claims related to bad mortgages the bank sold to the housing finance giant, the companies said Monday.
The settlement resolves all disputes between the two firms related to home loan deals during the subprime housing boom, BofA said.
The payment, less a credit of about $13 million toward the settlement for loans BofA had already repurchased from Freddie Mac, releases the bank from potentially being forced to repurchase about 716,000 mortgages originated from 2000 to 2009.
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“We are pleased to have reached this agreement with Bank of America, which now allows both companies to move forward,” said Donald H. Layton, chief executive of Freddie Mac.
“We continue to make very good progress in recovering funds that are due to the American taxpayer,” he said.
BofA said the $404-million settlement was covered by money set aside by the bank in reserves.
The payment adds to the price tag for settlements, repurchases and litigation related to mortgages sold by BofA and by Countrywide Financial Corp., the Calabasas-based lender the bank acquired in 2008.
Among those payments was more than $10 billion to Fannie Mae in January, including an agreement to buy back $6.75 billion in loans.
As of Sept. 30, the bank said it had paid about $19 billion in claims and had set aside about $14 billion in reserves for future payments.
Freddie Mac and sibling firm Fannie Mae were seized by the federal government in 2008 as they teetered near bankruptcy because of soured mortgages they purchased and guaranteed during the subprime housing boom.
Taxpayers pumped about $187.5 billion into Fannie and Freddie in the largest financial crisis bailout. As the housing market has recovered, the finances of the companies have improved and they will have paid about $185.3 billion in dividends to the government on the bailouts by the end of the year.
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