BofA bites bullet to tune of $2.8B

Bank of America is kicking off the new year with a little housecleaning. The nation's biggest lender forked over $2.8 billion to mortgage giants Fannie Mae and Freddie Mac to resolve a dispute over soured loans that has dogged the bank's shares.

BofA made payments of $1.28 billion to Freddie and $1.52 billion to Fannie to repurchase mortgages that the government-sponsored entities contend fell short of agreed-upon standards.

The move came as a relief to investors who have been fretting that major lenders will be forced to buy back tens of billions in mortgages believed to be improperly originated.

The settlement removed some of the lingering concern and fueled a run-up yesterday in financial stocks. BofA's shares spiked 6.4 percent before closing at $14.19. JPMorgan Chase shares closed up 2.7 percent at $43.58, Wells Fargo rose 2 percent to $31.58 and Citigroup popped 3.6 percent to $4.90.

Problems with how mortgages were originated have fueled repurchase requests by Fannie and Freddie, which serve as key cogs in the mortgage-market machinery. Last week, Ally Financial agreed to pay $462 million to Fannie to settle buyback claims.

BofA's agreement comes three months after it froze foreclosures after troves of homeowners claimed that lenders were seeking to foreclose on properties despite missing or inaccurate mortgage documentation. BofA lifted its freeze on foreclosures about three weeks ago.

The bank's CFO, Charles Noski, said on a conference call yesterday with investors that settling the disputes with Fannie and Freddie could amount to a $3 billion hit to the company's fourth-quarter results.

The CFO also warned that Wall Street shouldn't view the settlement as a concession to other investors pushing to get banks to repurchase dicey mortgages.

"Nothing that we've announced today should be seen as a departure from our basic principles as it relates to our representations and warranties liability," Noski said. mark.decambre@nypost.com

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