Bank of America Corp. will take a $3 billion fourth-quarter charge stemming from settlements with Freddie Mac and Fannie Mae over poorly underwritten mortgages the bank sold to the government-sponsored enterprises.
B of A said in a press release on Monday that the settlements address "its remaining exposure to repurchase obligations for residential mortgage loans sold directly to the GSEs."
The Federal Housing Finance Agency, the conservator for Fannie and Freddie, said in a separate announcement that it had approved three settlements worth a total of $3.3 billion that B of A and Ally Financial Inc. made with Freddie and Fannie. Ally, formerly known as GMAC, said last week that it had agreed to pay $465.1 million to Fannie to resolve all mortgage repurchase liabilities with the GSE.
FHFA Acting Director Edward DeMarco said in the regulator's release that the agreements are part of its "ongoing efforts to ensure the Enterprises enforce claims for violations of representations and warranties incurred by Enterprises or breaches of other legal obligations."
B of A's settlements pertain to mortgages that Countrywide Financial Corp. sold to Fannie and Freddie. The bank bought Countrywide in 2008.
"These actions resolve substantial legacy issues in the best interest of our shareholders," Brian Moynihan, B of A's president and chief executive, said in a press release.
The company's agreement with Freddie, worth $1.28 billion, resolves outstanding and potential mortgage repurchase claims for mortgages sold to Freddie through 2008, which totals 787,000 loans with an unpaid principal balance of $127 billion.
Its agreement with Fannie, worth $1.52 billion, addresses repurchase claims outstanding as of Sept. 20 for 12,045 loans with about $2.7 billion of unpaid principal balances. It also addresses other claims on an additional 5,760 loans with $1.3 billion of unpaid principal. Unlike the deal with Freddie, the one with Fannie does not cover future claims.
B of A still faces potential litigation from investors who bought private-label mortgage securities from Countrywide. Last month the company said it was holding "constructive" talks with a small group of highly influential holders of these securities, who had accused B of A of failing to uphold its obligations as a servicer. The group includes BlackRock Inc., Pacific Investment Management Co., and the Federal Reserve Bank of New York.
