Perspective on Bank of America's putback woes

Bank of America second-quarter earnings announcement held a surprise. The volume of putback demands from mortgage-bond investors and insurers surged more than 40 percent, surpassing $22 billion.

The news did not go over well and left analysts scrambling for more information. Bloomberg reports that the bulk of the new claims stem not from Countrywide-related mortgages, but rather from mortgages originated by Bank of America and Merrill Lynch. Unsettled claims from private investors rose 77 percent to $8.6 billion in the second quarter, mostly from trustees of mortgage-bond pools that weren't included in an $8.5 billion settlement announced last year.

In addition, outstanding claims from government-sponsored enterprises rose to $11 billion from $8.1 billion. The bank has reserved more than $40 billion to resolve disputes on faulty loans and foreclosures, but that figure may head higher.

"Bank of America has been anticipating a rise in claims from private investors and building repurchase reserves, Chief Financial Officer Bruce Thompson has said. Ultimate losses from that group will be 'well below $1 billion."

Indeed, the bigger worry is the GSE mortgages. The developments on that front hasn't been all bad. While the relationship between Fannie Mae and Bank of America remains estranged, they are back to negotiating about the putback claims, though they remain far apart on the issues.

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