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BofA Says Putback Losses May Be $6 Billion Above Reserve

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BofA Says Putback Losses May Be $6 Billion Above Accruals
Bank of America Corp.’s liability for so-called representations and warranties was $16.3 billion as of Sept. 30, up about $300 million from three months earlier. Photographer: Victor J. Blue/Bloomberg

Oct. 17 (Bloomberg) -- Bank of America Corp., the lender that rescued Countrywide Financial Corp. in 2008, said losses could be as much as $6 billion beyond what’s been set aside for demands that the firm repurchase shoddy home loans.

The new disclosure covers the range of possible losses for both private investors and claims from so-called government sponsored enterprises. Losses on just private claims were projected to exceed accruals by $5 billion as of June 30, the Charlotte, North Carolina-based lender has said.

“Based on discussions and where we are, we do have enough information to estimate a range of possible loss, not just for excluding the GSEs, but also including the GSEs,” Chief Financial Officer Bruce Thompson said in a conference call with reporters today. “We still have certain disagreements and haven’t resolved anything with Fannie Mae, but we do have information to provide what we have.”

Analysts had pressed Chief Executive Officer Brian T. Moynihan, 53, for additional disclosures on losses from mortgages. The firm has already booked more than $40 billion in costs tied to Countrywide, whose lax lending standards helped fuel the housing bubble.

The lender has an ongoing disagreement with Fannie Mae “about what constitutes a valid repurchase request, standards for rescission of repurchase requests and resolution processes,” it said today in a slide show as it announced third-quarter results.

Unresolved Demands

Unresolved demands that Bank of America repurchase mortgages rose 12 percent to $25.5 billion as of Sept. 30, fueled by disputes with Fannie Mae and private investors, the firm said. The bank’s liability for so-called representations and warranties was $16.3 billion as of Sept. 30, up about $300 million from three months earlier.

Previously, Bank of America said it couldn’t project how much more might be needed to resolve disputes with Fannie Mae because the firm’s demands “remain inconsistent with our interpretation of our contractual obligations.”

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Rick Green at rgreen18@bloomberg.net

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