Bank of America Corp. is settling some buyback claims on bad home loans sold to Fannie Mae and Freddie Mac as it attempts to separate itself further from one of the housing downturn’s biggest headaches.
The nation’s largest bank also said Monday that the Federal Reserve has confirmed it no longer has any obligations under the government’s Troubled Asset Relief Program, as it made good on a promise to increase equity by $3 billion.
The announcements sent the company’s stock up 68 cents, or 5.1 percent, to $14.02 in morning trading.
Bank of America’s deals with Fannie Mae and Freddie Mac are linked to Countrywide Financial Corp. residential mortgage loans. The Charlotte-based bank purchased Countrywide in July 2008. But Calabasas, Calif.-based Countrywide spiraled downward during the financial crisis when it became clear many of its borrowers wouldn’t be able to repay mortgages that had required no proof of income or down payment, and contained adjustable rates that quickly made monthly payments unaffordable.
Chief financial officer Charles Noski said during a conference call that Bank of America had been in “vigorous” negotiations with Fannie Mae and Freddie Mac to resolve the matter.