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.

Excluding the settlement and other mortgage charges, the bank's second-quarter net income will be between $3.2 billion and $3.7 billion.

Citi analyst Keith Horowitz said the settlement, which amounts to only 2 percent of the original principal balance, removes one of the largest investor risks for Bank of America.

"We think this could prove to be a step forward" for Bank of America, Horowitz said. It would show investors that the bank can manage through crisis without raising additional capital.

As a result of the settlement, Bank of America put its second-quarter loss at $8.6 billion to $9.1 billion. Excluding the settlement and other charges, the bank expects to post a quarterly loss of $3.2 billion to $3.7 billion.

"This is another important step we are taking in the interest of our shareholders to minimize the impact of future economic uncertainty and put legacy issues behind us," Bank of America Chief Executive Brian Moynihan said in a statement. "We will continue to act aggressively, and in the best interest of our shareholders, to clean up the mortgage issues largely stemming from our purchase of Countrywide."

In a statement released Wednesday morning, the bank said the settlement will contribute to a second-quarter loss of between 88 and 93 cents a share. That includes a goodwill impairment charge of $2.6 billion, the bank said.

“This is progress in that it puts some parameters around what the total loss will be,” Marty Mosby, a Nashville-based analyst at Guggenheim Securities LLC told Bloomberg News.

"It’s not a great thing to pay this much, but it’s not the worst-case scenario either," Mosby added.

Bank of America began talks last fall with the investors, which include money manager BlackRock Inc. and the Federal Reserve Bank of New York. The investors bought the loans from Countrywide, which Bank of America purchased for $4 billion in 2008.

The investors, who are represented by a Texas law firm, hold about 230 securitizations with original collateral exposure of about $177.1 billion, according to a securities filing. The Fed inherited Countrywide loans during the 2008 bank bailouts.

"Our clients are pleased that Bank of America has agreed to take the steps necessary to put these claims behind it," said Kathy Patrick of Gibbs & Bruns LLP, lead counsel for the investors. "Bank of America has charted a path our clients expect other banks will follow."

Requests to buy back defective mortgages have been a major cloud hanging over the bank and its chief executive Brian Moynihan, who is 18 months into a difficult turnaround effort. After initially pledging to fight repurchase requests loan by loan, the CEO has taken steps that he has said are necessary to put the issue behind the bank.

In January, Bank of America announced a $2.8 billion settlement with Freddie Mac and Fannie Mae that helped address its exposure to claims by those two government-controlled mortgage giants. In April, the bank reached an agreement with an insurer that is expected to cost about $1.6 billion.

The latest settlement applies to a third batch of claims, those with private investors. The bank has said these repurchase requests could cost $7 billion to $10 billion in excess of the reserves it already has taken. At the end of the first quarter, it had set aside $6.2 billion to cover mortgage repurchase requests.

The $8.5 billion agreement addresses a significant amount of risk the bank faces from private investor requests, people familiar with the matter said. Bank of America's board met to consider the settlement on Tuesday.

The huge payment could also set a benchmark for other large banks, including Wells Fargo and JPMorgan Chase, which also face investor demands.

Bank of America agreed to buy Countrywide in January 2008 as the mortgage lender verged on collapse. The move was initially seen as a potentially lucrative deal, but it quickly soured as loans and legal claims mounted.

The bank's mortgage unit has lost $15.9 billion since the fourth quarter of 2008. Federal banking regulators have ordered the bank to improve foreclosure processes and state attorneys general continue to investigate servicing issues. Of the bank's 1.3 million home loan customers who are at least 60 days delinquent, 85 percent are from Countrywide.

From the beginning of 2008, Bank of America has posted $46 billion in housing-related losses and could rack up $27 billion more by the end of 2013, according to a report this month by Sanford C. Bernstein analyst John McDonald.

Bank of America's shares have suffered as investors worry about mortgage-related losses, falling about 19 percent this year.

Associated Press contributed.