Monday, December 2, 2013

Bank of America and Freddie Mac Agree to Settlement

The Bank of America and Freddie Mac have reached a settlement arising from disputes over residential mortgages that the bank sold to Freddie Mac between 2000 and 2009.  Many of the loans were worthless.  The settlement calls for the payment of $404 million to settle call claims arising from residential mortgage repurchase agreements as well as some other claims.  This settlement ends all contractual disputes between the parties that arose from loans before the beginning of the financial crisis. 
While the $404 million may appear meager in comparison to a recent JP Morgan Chase settlement, this is the last in a series of settlements between the parties and Band of America and Fannie Mae.  In 2010 BofA agreed to pay Freddie and Fannie $2.8 billion based on loans originating with Countrywide Financial.  Earlier this year the bank agreed to an $11.6 billion settlement with Fannie Mae. 
Since the financial crisis, new regulations have gone into effect that allow Fannie and Freddie to force banks to repurchase certain substandard loans.

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