NEW YORK ( TheStreet) -- Bank of America ( BAC) still faces "significant legal tail risk" tied to mortgage-backed securities (MBS), argues CLSA analyst Mike Mayo.

Mayo, who has a "sell" rating on Bank of America, has stood his ground even as Bank of America has strung together a series of legal wins tied to its mortgage backed securities litigation exposure. The analyst argues an $8.5 billion settlement reached in 2011 between Bank of America and several large institutions is still at risk of being thrown out by New York State Supreme Court, Judge Barbara Kapnick even though many parties who initially objected, including the Attorneys General of New York and Delaware and have dropped their opposition to the deal. Institutions agreeing to the settlement include Goldman Sachs ( GS), BlackRock ( BLK) and Metlife ( MET), while AIG ( AIG) is the main remaining objector. BNY Mellon ( BK) was the trustee that approved the deal, which relates to MBS originally valued at more than $100 billion.

Judge Kapnick on Monday and Tuesday heard opening arguments over the question of whether to approve the settlement, as Mayo sat in the courtroom. The trial is expected to continue at least into July.

Bank of America listed $28.3 billion in "unresolved representations and warranties repurchase claims" in its 2012 10-K filing and $19 billion in "recorded liability related to representations and warranties repurchase exposures."

However, the bank's 10-K also notes "our representations and warranties losses could be substantially higher than existing accruals and the existing estimated range of possible loss for representations and warranties liability if court approval of the BNY Mellon Settlement is not obtained or if it is otherwise abandoned."

Mayo raised questions about the settlement in a research note published in February . At the time, he argued Bank of America needed to reserve another $16 billion to $22 billion against possible losses tied to MBS legal claims.

-- Written by Dan Freed in New York.

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