Bank of America, Freddie Mac Settle Repurchase Claim

Bank of America has settled another claim for loans it either originated during the housing boom or acquired through its purchase of another lender.  The latest in the series of settlements was announced today by Freddie Mac and will cost the Bank $404 million less a credit of $13 million for loan repurchases already made and other accounting adjustments.

Under terms of the recent agreement, Freddie Mac will release Bank of America from certain existing and future purchase obligations for approximately 716,000 loans purchased by Freddie Mac.  The loans were mainly originated between 2000 and 2009.  The money compensates Freddie Mac for certain past losses and potential future losses relating to denials, rescissions, and cancellations of mortgage insurance.

While information released by Freddie Mac was sketchy, it appears this is the final agreement arising out of discussions widely reported in mid-November.  Those negotiations involved more the $1.4 billion in allegedly defective mortgages and sources at that time said Bank of America was anxious to finalize the agreement before the end of the year.

This would be at least the second settlement between the Bank and Freddie Mac since 2011.  The original source of the loans was not announced, but many of the legal problems faced by Bank of American have arisen out of the bank's purchase of Countrywide Mortgage shortly before the housing boom began to unwind. 

"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. "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."