BofA Eliminates 'Some' Put-Back Risk

Bank of America shares are benefiting greatly from the bank’s deal with Fannie Mae and Freddie Mac that resolves a dispute over misrepresentations made about the quality of mortgages purchased by the GSE’s (government-sponsored enterprise) from Bank of America’s Countrywide unit.

Bank of America exterior shot.
Source: Getty Images
Bank of America exterior shot.

The settlement ends the protracted process by which the GSE’s were challenging BofA on a security by security basis and gives investors comfort on the total liability that BofA has with regard to this issue with the GSE’s.

But, Monday’s settlement does little to deal with a liability that could far exceed the settlement with the GSE’s—the so called “private put-back” of mortgage securities by their holders to Bank of America.

Some may take the settlement as a sign that BofA is more open to reaching a settlement with holders of private securitizations.

That’s the hopeful position being taken by Talcott Franklin, an attorney leading the charge against mortgage securitizers such as BofA on behalf of holders of such mortgage securities.

The issue is complex and it remains far from clear that much can be gleamed from Monday’s action. Franklin, in an interview on The Strategy Session earlier today, told me he expects to become much more aggressive on this issue as the year progresses.

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