December 2, 2013 / 1:04 PM / 5 years ago

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

(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 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 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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