BofA mortgage buyback risk to reach $9bn?

18 August 2011

Bank of America (BofA) could have to pay an extra $9 billion as part of a settlement with bond insurers, depending on court decisions.

The bank could be forced to pay back the extra cash because of liability for faulty mortgages, with insurer MBIA claiming the lender should buy back loans even if mistakes made did not result in a default.

Hedge fund Branch Hill Capital predicted such court cases could lead to BofA, which has a history stretching back over 200 years, having to shell out an extra $9 billion - and has invested in MBIA and against the lender's stock as a consequence.

David Grais, a partner at Grais and Ellsworth LLP - which represents investors objecting to a possible settlement between the lender and Countrywide Financial Corp - said: "You don't have to wait until you’re in a severe accident before you return the car with bad brakes."

By Claire Archer

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development