Bank of America has said that in the fourth quarter of 2010 it expects to take a provision of approximately $3bn related to repurchase obligations for residential mortgage loans sold by Bank of America affiliates directly to Freddie Mac and Fannie Mae (collectively, the Government Sponsored Entities or GSEs).
Bank of America president and CEO Brian Moynihan said these actions resolve substantial legacy issues in the best interest of the company’s shareholders.
"Our goals remain the same: put these issues behind us; focus on serving customers and clients; and continue to help distressed homeowners facing difficult times," Moynihan said.
The agreement with Freddie Mac extinguishes all outstanding and potential mortgage repurchase and make-whole claims arising out of any alleged breaches of selling representations and warranties related to loans sold by legacy Countrywide to Freddie Mac through 2008 (787,000 loans with a total unpaid principal balance of $127bn).
The agreement provides for a cash payment to Freddie Mac of $1.28bn, which was made on 31 December 2010.
The agreements with Freddie Mac and Fannie Mae do not cover loan servicing obligations, other contractual obligations or loans contained in private label securitizations.
