Bank of America has agreed to pay $404 million to Freddie Mac to settle claims that the bank misrepresented the quality of single-family loans it sold to the government-sponsored enterprise (GSE) between 2000 and 2009.
Bank of America has already paid Freddie Mac $13 million for the repurchase of ‘faulty’ loans and, therefore, will get credit for those payments as part of the settlement deal.
The agreement signed by the two organizations indemnifies Bank of America from additional claims on certain existing and future repurchase obligations for approximately 716,000 loans originated primarily between 2000 and 2009, and subsequently purchased by Freddie Mac.
The settlement also compensates Freddie Mac for certain past losses and potential future losses relating to denials, rescissions and cancellations of mortgage insurance.
‘We are pleased to have reached this agreement with Bank of America, which now allows both companies to move forward,’ says Donald H. Layton, CEO of Freddie Mac, in a press 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.’
Several other banks have reached similar deals with the GSEs in recent months. In October, the Federal Housing Finance Agency, conservator for the GSEs, announced that JPMorgan had agreed to pay $5.1 billion to Freddie Mac and sister-GSE Fannie Mae to resolve outstanding mortgage issues. Earlier that same month, it was announced that SunTrust had reached a deal with the GSEs over mortgage purchase requests totaling more than $1 billion.
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