Bank of America sets billions aside to cover mortgage losses

Bank of America Corp. announced Wednesday morning that it has agreed to pay $8.5 billion to settle claims by a group of investors that took losses on soured mortgage-backed securities.

The settlement covers nearly all of the exposure the bank faces from former Countrywide Financial first-lien mortgage securitizations, Bank of America said in a news release. The agreement covers 530 mortgage bond trusts with original principal of $424 billion.

The agreement is supported by major investors, including money manager BlackRock and the Federal Reserve Bank of New York. It still needs court approval.

Bank of America also plans to set aside an additional $5.5 billion to cover mortgage repurchase requests by mortgage giants Freddie Mac and Fannie Mae and other entities in the second quarter. The bank expects to report a loss of between $8.6 billion to $9.1 billion in the second quarter of 2011.

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