BofA Was Pressed by SEC for Disclosure on Reserves for Mortgage Buybacks
Stock Chart for Bank of America Corp (BAC)
Bank of America Corp. (BAC), in an exchange of letters with U.S. regulators that lasted over a year, was pressed for information about its reserves to cover the cost of buying back faulty home loans.
“Discuss the level and type of repurchase requests you are receiving, and any trends that have been identified, including your success rates in avoiding settling the claim,” the Securities and Exchange Commission said in a Jan. 29, 2010, letter to the Charlotte, North Carolina-based bank that was released today. “Tell us and disclose in future filings how you establish repurchase reserves for various representations and warranties that you have made.”
Bank of America, the largest U.S. lender, said Jan. 21 this year that resolving disputes could cost as much as $7 billion to $10 billion more, after setting aside $4.1 billion in the fourth quarter. The company has been battling accusations that mortgage investors were duped into buying loans issued with overstated property values and inflated borrowers’ incomes.
The 2010 document was one of at least a dozen letters exchanged by the regulator and the bank over disclosures tied to credit cards, home-equity loans and the establishment of reserves. The SEC said Feb. 18 that it had reviewed the company’s filings, including one on Jan. 21 of this year, and had no further comments. Such correspondence is typically released about six weeks after an SEC review is complete.
‘It’s Not Unusual’
“It’s not unusual for the SEC to have questions about our regulatory filings and as the letters indicate we responded to those questions and the issues appear to be resolved,” Bank of America spokesman Jerry Dubrowski said in a phone interview.
Regulators released correspondence with Citigroup Inc. (C) last month that showed the SEC had questions about the New York-based bank’s representation and warranties going back to April of last year. Wells Fargo & Co. (WFC) received a similar letter.
“More thoroughly discuss the risks and uncertainties associated with developing your estimated liability for representations and warranties, particularly in situations where you have limited experience dealing with certain counterparties,” the SEC said in the April 30 letter to Citigroup.
To contact the editor responsible for this story: David Scheer at firstname.lastname@example.org
Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.