BofA reaches $3 bn settlement with Freddie Mac, Fannie Mae

Bank of America (BofA) will make a provision for charges worth $3 billion in the fourth quarter, related to repurchase of bad loans from mortgage lenders Freddie Mac and Fannie Mae.

These bad loans were given by entities related to Countrywide Financial Corp, which was acquired by Bank of America (BofA) in 2008.

BofA today said it has reached agreements with Freddie Mac and Fannie Mae regarding buy back of certain residential mortgage loans.

"In the fourth quarter of 2010, it (BofA) expects to take a provision of approximately $3 billion related to repurchase obligations for residential mortgage loans sold by Bank of America affiliates directly to Freddie Mac and Fannie Mae," the banking major said in a statement.

Under the agreements, BofA has already paid $1.28 billion to Freddie Mac and $1.34 billion to Fannie Mae.

"These actions resolve substantial legacy issues in the best interest of our shareholders," BofA's President and CEO Brian Moynihan said.

In the wake of the financial meltdown, many of the mortgage loans involving Countrywide Financial went sour. This also resulted in rising loan liabilities for BofA.

Further, BofA expects to record "non-cash, non-tax deductible goodwill impairment charge of approximately $2 billion in the fourth quarter of 2010 in its Home Loans and Insurance business segment".