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BofA Settles with Fannie & Freddie on Mortgage Repurchases

Update: 11:41 A.M EST

Bank of Americaannounced agreements with Fannie Mae & Freddie Macthis morning: Parsing the details will likely require days—but the broad takeaway is this: BofA's agreement appears to settle the vast majority of GSE legacy mortgage repurchase claims assumed by Bank of America after their purchase of Countrywide.

A Bank of America trader inside the NYSE.
Oliver Quillia for CNBC.com
A Bank of America trader inside the NYSE.

The agreement involves a total of $2.8 billion in payments from Bank of America to the two GSEs (Government Sponsored Enterprises).

A Bank of America press release from this morning explains:

"Extinguishes 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 for $1.28 billion"

"Substantially resolves the existing pipeline of repurchase and make-whole claims outstanding as of September 20, 2010, arising out of alleged breaches of selling representations and warranties related to loans sold by legacy Countrywide to Fannie Mae for $1.52 billion"

It is unclear at this point what significance—if any—we should attribute to the difference in language used by BofA in describing the settlements with the two agencies.

A source at Freddie Mac familiar with the matter told me that this agreement settles 'substantially all' of Freddie's claims against BofA.

It is not known at this time precisely what carve outs—if any—remain in the settlement with Freddie Mac.

In a conference call this morning, Bank of America CFO Charles Noski characterized BofA's settlement with Fannie Mae as less 'global' than their settlement with Freddie Mac. Noski also stated that the Freddie Mac portfolio is smaller than the Fannie Mae portfolio "in terms of the magnitude of business we've done with each."

Bank of America shares are trading nearly 5 percent higher this morning as of the time of this post.

Developing…

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