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Bank of America Corp. (NYSE: BAC) yesterday (Monday) agreed to pay Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCC) $2.8 billion to settle claims that it sold the mortgage finance companies bad home loans that were issued by its troubled Countrywide Financial unit.
The announcement sparked a rally in the banking giant's shares in New York trading, pushing BofA stock up as much as 4.5%. Analysts said investors were relieved the bank would not have to buy back billions of dollars of home loans it sold to investors at the height of the housing boom.
"This takes away a nice headline risk" for Bank of America, Alan Villalon, a senior bank analyst at Chicago-based Nuveen Investments told Reuters.