Bank of America To Pay $404 Million Settlement With Freddie Mac Over Repurchased Mortgages
Bank of America has reached a settlement agreement with Freddie Mac over repurchased mortgages to the tune of $404 million, the companies announced Monday.
“We are pleased to have reached this agreement with Bank of America, which now allows both companies to move forward,” said Freddie Mac CEO Donald H. Layton via media release.
“We continue to make very good progress in recovering funds that are due to the American taxpayer, as well as resolving Freddie Mac’s legacy repurchase issues.”
The Bank of America settlement concerned Freddie Mac’s claims related to representations and warranties on approximately 716,000 single-family loans sold to the company by Bank of America, primarily between 2000 and 2009.
Bank of America will pay the settlement less credits of $13 million for repurchases already made and for reconciling adjustments. Bank of America will also compensate Freddie Mac for certain past losses and potential future losses relating to denials, rescissions, and cancellations of mortgage insurance.
According to the press release from Bank of America, the payments are “fully covered by existing reserves as of September 30, 2013.” Comments from Bank of America executives were not present in the release.
Bank of America joins the likes of Wells Fargo and Citigroup with the settlement; Wells Fargo agreed in September to pay Freddie Mac $780 million, and Citigroup settled for $395 million to resolve mortgage repurchase liabilities, the New York Times reports.
It’s not the first settlement Bank of America has made recently with government-sponsored financial giants (and certainly not the largest). Fannie Mae was on the receiving end of a combined $10 billion settlement earlier this year.
The terms of the previous deal encompassed $3.55 billion in cash payments, and an agreement to repurchase $6.75 billion in loans originated with Countrywide, which Bank of America snapped up in 2008. Bank of America was found liable for fraud related to faulty loans sold by Countrywide in another case stemming from the financial crisis.
What do you think of the news regarding Bank of America’s settlement with Freddie Mac? Does this affect your opinion on doing business with Bank of America or purchasing Bank of America securities?