Bank of America has agreed to pay the Fannie Mae and Freddie Mac mortgage agencies about $US2.6 billion to settle claims it sold them bad home loans.
Shares in the bank rose by 4.7% on Monday after the announcement was made.
The bank said it made a cash payment of $US1.28 billion to Freddie Mac and one of $US1.34 billion to Fannie Mae on 31 December.
It said the payments "extinguish all outstanding and potential mortgage" claims made against it by Freddie Mac and "substantially resolves" those made by Fannie Mae.
The BBC reports the claims relate to loans sold by Countrywide Financial Corporation, which Bank of America bought in 2008.
Fannie Mae and Freddie Mac said the loans were made without meeting underwriting requirements, such as income levels and home values.
Fannie Mae described the agreement with Bank of America as "a fair and responsible resolution" of the claims.
