Bank of America Says Legal Losses Could Hit $2.3 Billion

By | August 5, 2011

Bank of America Corp.’s legal losses could cost as much as $2.3 billion above money already set aside to cover litigation, the largest U.S. bank by assets said in a securities filing.

BofA raised the possible legal loss estimate by $700 million in its second quarter report, filed with the U.S. Securities and Exchange Commission Thursday.

In the first quarter, BofA said litigation losses could cost up to $1.6 billion above existing reserves.

The increase signals BofA’s long-running litigation woes may not be behind it.

The bank is the subject of on-going investigations by state and federal authorities relating to home foreclosures, and demands from outside investors that the bank repurchase billions in toxic home loans now part of soured securities.

And recent settlements are not reducing the bank’s projections for worst-case legal losses.

During the second quarter, the bank entered into an $8.5 billion settlement with a group of large mortgage-backed securities investors who hold Countrywide Financial Corp mortgage bonds and Bank of New York Mellon, who is the trustee for the securities.

BofA bought Countrywide in July 2008.

That pact is awaiting court approval, and several investors have already publicly said they will work to block the deal.

Late Thursday, the New York Attorney General Eric Schneiderman joined the growing opposition to the settlement, and said in a court filing the deal may interfere with his ability to pursue claims against the banks involved.

BofA shares closed down 7.4 percent at $8.83 on the New York Stock Exchange in a broad industry sell-off.

(Reporting by Joe Rauch, editing by Bernard Orr; editing by Carol Bishopric)

Was this article valuable?

Here are more articles you may enjoy.