Bank of America and Loan Risk

?Mortgage industry analysts say that the Bank of America is in a class by itself when it comes to put-back claims. The so-called “put-backs” or repurchases, relate to mortgage loans that were pooled together and stuffed into bundles of bonds known as mortgage-backed securities (MBS) before the current financial crisis struck.

Last year the Bank of America and other big and medium-sized mortgage lenders were exposed to the threat of untold billions in potential losses from exposure to an unhealthy number of foreclosed homes in the United States. A report at the time put the total risk to the banks at a whopping $134 billion. Since then, most of the banks have spent a great deal of time working with investors on put-backs, and while claims against most of the other banks appear to be stabilizing or dropping back, the Bank of America saw an increase of $3 billion in the first quarter alone.

Most of the buyers of the mortgage-backed securities bundles were large institutional money managers like insurance companies and pension funds, and many of those entities lost a lot of money on their MBS investments. Many buyers claimed that the mortgages that were bundled into the MBS were fraudulent to begin with or did not meet the criteria originally promised. Although many banks did get a handle on their put-back exposure, when the current numbers are compared, it does show that B of A is still carrying far more risk than any other institution. The Bank of America currently shoulders $13.6 billion in put-back claims alone while the combined total of six other major lending banks is far less. JPMorgan Chase, Wells Fargo, Citigroup, Capital One Financial, First Horizon National Corp. and SunTrust Banks all have a combined put-back exposure risk of just $9 billion.