CHARLOTTE, N.C. (
Bank of America
(BAC - Get Report) cleared up one item that had been weighing on its stock when reporting quarterly results on Tuesday: Mortgage buyback demands are nowhere near the $70 billion figure
BofA reported that mortgage buyback demands are less than $13 billion as of Sept. 30.
However, CFO Chuck Noski outlined some information that will keep investors scratching their heads about the firm's total liability. The details came hours ahead of a report regarding private investors' repurchase requests that helped push Bank of America's stock down sharply.
On a conference call Tuesday morning, Noski expressed comfort with estimates related to government-sponsored enterprises (GSEs) Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB). But he noted that numbers for monoline insurers and private label investors were difficult to pin down, due to litigation and fewer requests to-date.Noski characterized Bank of America's experience with monoline insurers so far as "episodic" and "all over the map." He added that it was "not possible to reasonably estimate" exposure to private-label buyback requests because Bank of America has had only limited experience with a motley crew of litigious counterparties. On Monday, a group of institutional investors represented by Gibbs & Bruns LLP said they had sent Bank of America a letter asking that it repurchase $47 billion worth of MBS. On Tuesday afternoon, a Bloomberg report indicated that the Federal Reserve Bank of New York, Pacific Investment Management Co. (PIMCO), BlackRock (BLK) and MetLife (MET) may be among those seeking buyback relief. The buyback issue has gained traction in recent months. Large mortgage lenders, including Bank of America, JPMorgan Chase (JPM - Get Report) and Wells Fargo (WFC - Get Report), have boosted reserves to cover related losses, even as firm-wide reserves drop by billions. Last week, JPMorgan said it had added $1 billion to reserves against mortgage repurchases, having faced $1.5 billion in related losses during the September quarter. The buyback issue hinges on similar errors as the documentation mess that has crippled the foreclosure process in recent weeks - but at the point of origination rather than default.