BofA settles with Fannie, Freddie over Countrywide repurchases

Bank of America (BAC) plans to record a fourth-quarter charge of $3 billion after settling repurchase claims brought against the banking giant by Fannie Mae and Freddie Mac on home loans sold to the GSEs by Countrywide Financial Corp. The bank holding company said it now “believes that it has addressed its remaining exposure to repurchase obligations for residential mortgage loans sold directly to the GSEs.” Bank of America paid $1.28 billion to Freddie Mac and $1.34 billion to Fannie Mae last week as part of the settlement. Bank of America said the agreement ends all outstanding and potential claims of any alleged breaches of selling representations and warranties related to the roughly 787,000 loans with an unpaid balance of $127 billion sold to Freddie Mac by Countrywide through 2008. The agreement with Fannie Mae ends representations and warranties claims on 12,045 loans with an unpaid principal balance of $2.7 billion, as well as missing-documentation claims on another 5,760 loans with $1.3 billion of unpaid balance. “The agreement substantially resolves outstanding repurchase requests on 12,045 loans sold to us by Countrywide, addresses 5,760 other loans sold to us by Countrywide and permits us to bring claims for any additional breaches of our representations and warranties that are identified with respect to those loans,” said a statement from Fannie Mae. “Fannie Mae continues to work with Bank of America to resolve repurchase requests that remain outstanding, including requests relating to loans delivered to the company by Bank of America.” Chris Whalen of Institutional Risk Analytics said the agreement should help Bank of America, while hindering the results of the GSEs. “We see this announcement as a gift to BAC and negative for FNM/FRE results,” Whalen said. “We see this as a positive for BAC but not the end of the road in terms of losses.” The agreements don’t cover loan-servicing obligations, other contractual obligations or loans included in private-label securitizations. Write to Jason Philyaw.