Bank of America to pay Freddie Mac $404 million in mortgage settlement

Mon Dec 2, 2013 9:04am EST

The logo of the Bank of America is pictured atop the Bank of America building in downtown Los Angeles November 17, 2011. REUTERS/Fred Prouser

The logo of the Bank of America is pictured atop the Bank of America building in downtown Los Angeles November 17, 2011.

Credit: Reuters/Fred Prouser

(Reuters) - Bank of America Corp will pay $404 million to Freddie Mac to resolve all repurchase liabilities on home loans sold to the government-controlled mortgage company from 2000 to 2009, the bank said on Monday.

The settlement covers about 716,000 loans and compensates Freddie Mac for past losses and potential future losses related to denials, rescissions and cancellations of mortgage insurance, Freddie Mac said in a statement.

Bank of America will pay a net $391 million, reflecting a $13 million credit for prior repurchases and adjustments, Freddie Mac said.

Since 2010, Bank of America has agreed to pay more than $45 billion to settle various claims stemming from the U.S. housing and financial crisis.

The Charlotte, North Carolina-based bank bought mortgage lender Countrywide Financial Corp in July 2008 and Wall Street bank Merrill Lynch six months later.

Previously, Bank of America agreed with Freddie Mac to resolve representations and warranties claims related to loans that Countrywide sold to Freddie Mac through 2008.

In January, the bank agreed to pay $3.6 billion to Fannie Mae, another government-controlled mortgage company, to resolve repurchase claims over Countrywide and Bank of America loans from 2000 to 2008.

The latest payment is covered by existing reserves, Bank of America said.

Freddie Mac and Fannie Mae received federal bailouts in September 2008 and since then have been pushing banks to buy back mortgages that soured during the housing crisis.

Banks can be forced to buy back loans if representations and warranties prove false over how well the loans were underwritten, and whether borrowers could afford them.

In September, Wells Fargo & Co and Citigroup Inc agreed to pay Freddie Mac $780 million and $395 million, respectively, to settle repurchase claims.

"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," Freddie Mac Chief Executive Donald Layton said in a statement.

The federal government is separately seeking $863.6 million in damages from Bank of America after a federal jury in October found the bank liable for defrauding Fannie Mae and Freddie Mac over defective mortgages sold by Countrywide. Bank of America has said damages in that case should be zero.

The settlement on Monday is also unrelated to lawsuits against Bank of America by the Federal Housing Finance Agency, the conservator of Freddie Mac and Fannie Mae, to recover losses on more than $57 billion in mortgage securities that they bought. A bank spokesman declined to discuss that case.

(Reporting by Jonathan Stempel in New York and Tanya Agrawal in Bangalore; Editing by Saumyadeb Chakrabarty and Jeffrey Benkoe)

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Comments (4)
doitright wrote:
is that enough?how about ceo getting prison time like madoff?madoff got prison time for ripping off the rich.ceo from bank of america gets no prison time for ripping off public.is it fair?

Dec 02, 2013 10:59am EST  --  Report as abuse
Harry079 wrote:
“First there is a number, then there is no number, then there is.”

“If you pull this thorn out of my foot I promise not to eat you.”

Dec 02, 2013 11:02am EST  --  Report as abuse
xyz2055 wrote:
doitright..First off, most of the fines levied on BOA were from the criminal activities at CountryWide, which BOA purchased for $4B in 2008. Angelo Mozilo was CEO of CountryWide and has already been tried in 2011. He and his management staffed settled with the federal government. Mozilo personally paid a $48M fine (while he had a net worth of $600M all earned at CountryWide). Ken Lewis was CEO at BOA when they purchased CountryWide. The CountryWide deal may be the worst deal in history. In 2009 the BOA board essentially forced Lewis to retire over this deal. He got a very nice parting gift…a pension package that totaled $53M. Brian Moynihan has been CEO at BOA since 2010. So essentially there is no one at BOA today that had anything to do with the fraudulent loans. The Justice Department set a very high standard for bringing criminal charges against the people who actually orchestrated these bad deals. Essentially because all of them were so well politically connected. More recently, look at Jon Corzine who bankrupted FM Global raiding investor accounts to fund the crazy investments risks he was taking. Which btw is absolutely illegal. Jon is former CEO of Goldman Sachs, politician and personal friend of Barack Obama. When this mess came to light, Obama did return the campaign contributions he received from Jon. But as of today Jon and his 100′s of millions of personal wealth are probably vacating somewhere and there’s no sign of any criminal charges coming his way any time soon. Too well connected to prosecute.

Dec 02, 2013 12:09pm EST  --  Report as abuse
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