Bank of America badly underestimated how much it would have to pay Fannie Mae and Freddie Mac for troubled home loans.
In a filing Thursday, Bank of America [BAC 8.17 -0.66 (-7.47%) ] said the cost of buying back mortgages from Fannie and Freddie is already as high as high as $7.8 billion.
Earlier this year it had estimated that it would only have $3 billion of additional claims.
The bank has been buying back mortgages that didn’t live up to the contractual representations and warranties it made when selling the mortgages. Many of them were originated by Countrywide Financial, the lending business Bank of America bought in 2008.
“Notably, in recent periods we have been experiencing elevated levels of new claims, including claims on default vintages and loans in which borrowers have made a significant number of payments (e.g., at least 25 payments), in each case, in numbers that were not expected based on historical experience,” the bank said in an SEC filing.
“Additionally, the criteria by which the [government-sponsored enterprises] are ultimately willing to resolve claims have become more rigid over time,” the bank said.
The filing was first reported by Bloomberg.
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