New York (AFP) – Bank of America said on Monday it will pay mortgage financier Freddie Mac $404 million to resolve claims over subprime loans the bank sold before the housing crisis.
Bank of America said the agreement would resolve all of Freddie’s remaining claims over more than 700,000 mortgage loans the bank’s Countrywide unit sold Freddie between 2000 and 2009.
Countrywide, which Bank of America took over in 2008, has been accused of generating and selling on to companies like Freddie and Fannie Mae millions of weak and poorly documented home loans as investment-quality assets.
A high percentage of the loans quickly fell into default when the economy plunged into recession in 2008, causing losses to the holders of the loans and securities they were bundled into.
Freddie Mac, now controlled by the US Treasury after it nearly collapsed in the crisis, said the deal would end all of its claims over single family home loans against Bank of America.
But the deal does not apply to securitized loans.
“We are pleased to have reached this agreement with Bank of America, which now allows both companies to move forward,” said Freddie Mac chief executive Donald 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.”
Bank of America said the payout is already covered by its existing reserves.
Copyright 2013 The National Memo