A trade group for bond insurers said that Bank of America Corp., the biggest U.S. lender by assets, should repurchase as much as $20 billion in home loans that were based on wrong or missing information. Banks are dealing with demands for repurchases from buyers and insurers of mortgage securities who say that the loans were created with false, misleading or missing data. Repurchases have already cost the four biggest U.S. lenders $9.8 billion, according to Credit Suisse Group AG.
Bank of America has said it faces $11.1 billion of unresolved claims, which it reviews on a “loan-by-loan” basis. More than half of the soured home-equity credit lines and residential mortgages created from 2005 through 2007 that insurers examined should be bought back, the Association of Financial Guaranty Insurers says. Repurchases may total $10 billion to $20 billion. Compass Point Research and Trading LLC predicted that 11 U.S. lenders could incur losses ranging from $55.3 billion to $179.2 billion.
Bank of America acquired Countrywide Financial Corp., once the biggest U.S. mortgage lender, in July 2008 after the target faced bankruptcy amid payment defaults and foreclosures. Insurers have also requested files on about $9.8 billion of loans that hadn’t triggered buyback claims as of June 30, according to Bank of America’s quarterly report.
Insurers are negotiating repurchases and suing firms including Bank of America as they seek to recover from losses on mortgage-security guarantees. Fannie Mae and Freddie Mac are among firms seeking to force banks to take back defective mortgages, especially those written during the peak of the housing boom, after defaults helped push the two federally backed firms and some insurers to the brink of collapse.