BofA Mortgage Repurchase Requests Total $11.1 Billion

Bank of America Corp., the biggest U.S. lender by assets, said it has been dealing with a “very limited” number of requests to repurchase soured mortgages out of securities lacking government-backed guarantees.

Unresolved mortgage-repurchase requests from all investors and insurers totaled about $11.1 billion on June 30, the Charlotte, North Carolina-based bank said today in a filing with the Securities and Exchange Commission. That included $33 million from so-called private-label mortgage-backed securities transactions, compared with $5.6 billion from government- sponsored enterprises such as Fannie Mae, $4 billion from bond insurers and $1.4 billion from other investors, the bank said.

“The corporation and its legacy companies have very limited experience with private label MBS repurchases as the number of repurchase requests received has been very limited,” Bank of America said. The company bought Countrywide Financial Corp., the largest U.S. home lender, in 2008 and Merrill Lynch & Co., the largest brokerage, at the start of 2009.

Debt owners and guarantors in other parts of the mortgage market may be finding it easier to reduce losses by forcing repurchases and rescinding insurance than investors in private- label, also called non-agency, mortgage securities, leading the latter bondholders to begin to seek greater action.

A group with more than $500 billion, coordinating through a Dallas lawyer, last month sent letters to bond trustees seeking their help. The Federal Reserve Bank of New York also said Aug. 4 it is trying to exercise “our rights as investors” after taking on debt through its bailouts of Bear Stearns Cos. and American International Group Inc.

Conflicts of Interest

Bondholders are concerned that the conflicts of interest of mortgage servicers, which must help identify claims on their behalf and are often owned by lenders, “can cloud the prospect that the interests of investors will be aggressively represented as required,” the Association of Mortgage Investors, a trade group, said in a July 31 comment letter on proposed changes to SEC regulations.

On Dec. 31, Bank of America’s unresolved repurchase requests were $7.6 billion, including $3.3 billion from GSEs, $2.9 billion from financial guarantors, $1.4 billion from other investors and $30 million from private-label mortgage-bond transactions, according to the filing.

The company’s liability, or reserves, for its potential losses on sold or insured mortgages totaled $3.9 billion on June 30, up from $3.5 billion on Dec. 31, according to the filing.

To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net David Mildenberg in Charlotte at dmildenberg@bloomberg.net

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