Bank of America Corp said it agreed to pay Fannie Mae and Freddie Mac $2.8 billion to settle claims that it sold the mortgage finance companies bad home loans. Bank of America shares climbed 3.5 percent in pre-market trading Monday. Investors have been worried that the bank, like other large mortgage lenders, will have to buy back billions of dollars of home loans it sold to investors.
Mortgage bond investors say the home loans should never have been sold to them in the first place because they did not meet investors' underwriting requirements. Bank of America said it made a $1.28 billion cash payment to Freddie Mac as part of an agreement to end all claims through 2008 related to mortgages sold by Countrywide, a mortgage company bought by the bank in 2008. The bank paid Fannie Mae $1.34 billion in cash and applied certain credits to reach an agreed $1.52 billion settlement on 12,045 Countrywide loans.
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