Bank of America has been the target of lots of angst over its $8.5 billion deal to settle putback claims with blue-chip bondholders, the likes of PIMCO and BlackRock. As other investors and the New York Attorney General continue to fight the deal in court, the once-sweet deal seems to be souring.

The costs of settlement could go dramatically higher. To add insult to injury, we may see a previous settlement with the big GSEs also unravel. Forbes notes some brow-raising language in a recent SEC filing by the bank: While the bank "has an established history of working with the GSEs on repurchase claims, its experience with them continues to evolve and impact the Corporation's estimated repurchase rates and liability. In addition, the recent Fannie Mae announcement regarding mortgage insurance rescissions, cancellations and claim denials could result in increased repurchase requests from Fannie Mae that exceed the repurchase requests contemplated by the estimated liability."

Bank of America now says it is "not possible to reasonably estimate a possible loss or range of possible loss with respect to any such potential impact in excess of current accruals on future GSE provisions if the behavior of the GSEs changes from past experience." So Fannie Mae and Freddie Mac appear to be having some second thoughts about the deal and going for more. They may have concluded that they gave away too much via the first settlement. This adds to the uncertainty over Bank of America and led to yet another massive sell off.  

For more:
- here's the Forbes article

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