The $404 million payout will resolve all repurchase liabilities on mortgages sold to Freddie by the bank between 2000 and 2009, according to a Reuters report. The payment will release Bank of America from future repurchase obligations on about 716,000 loans.
“We are pleased to have reached this agreement with Bank of America, which now allows both companies to move forward,” said Freddie Mac CEO Donald H. Layton. “We continue to make very good progress in recovering funds that are due to the American taxpayer, as well as resolving Freddie Mac's legacy repurchase issues.”
Banks can be forced to buy back loans from Freddie or Fannie Mae if they can be shown to have misrepresented underwriting standards or borrowers’ ability to repay. In January, Bank of America agreed to pay Fannie $3.6bn to resolve similar repurchase claims, Reuters reported.
The lender has agreed to pay more than $45bn since 2010 to resolve various claims related to its lending practices during the run-up to the financial crisis, according to Reuters.
Bank of America has agreed to pay Freddie Mac more than $400 million to compensate for past mortgage losses.