Bank of America settles buyback claims

CHARLOTTE, N.C. — Bank of America is settling some buyback claims on bad home loans sold to Fannie Mae and Freddie Mac as it attempts to separate itself further from one of the housing downturn's biggest headaches.

The nation's largest bank also said Monday that the Federal Reserve has confirmed the bank no longer has any obligations under the government's Troubled Asset Relief Program, as it made good on a promise to increase equity by $3 billion.

Bank of America's deal with Fannie Mae and Freddie Mac is linked to Countrywide Financial residential mortgage loans. The bank purchased Countrywide in July 2008. But Countrywide spiraled downward during the financial crisis when it became clear many of its borrowers wouldn't be able to repay mortgages that had required no proof of income or down payment, and contained adjustable rates that quickly made monthly payments unaffordable.

As part of the settlements, Bank of America made a $1.34 billion cash payment to Fannie Mae and a $1.28 billion payment to Freddie Mac on Friday.

Bank of America chief financial officer Charles Noski estimates the agreements reached with the companies leave Bank of America with $2.7 billion in outstanding claims for Fannie Mae and Freddie Mac.

Noski described the deal with Freddie Mac as more of a global settlement that includes future claims, while the agreement with Fannie Mae specifically relates to the existing pipeline and does not cover future claims.

The deals with Freddie Mac and Fannie Mae don't cover loan servicing obligations, other contractual obligations or loans contained in private label securitizations. But the agreements are a sign that the bank is working quickly to deal with buyback claims.

Fannie Mae said in a statement that the Bank of America deal was a "fair and responsible resolution" of the outstanding claims.