Mortgage Losses of $14b sets aside by BoA

Bank of America (BoA) said today, it has reached an agreement to resolve nearly all of the claims regarding to legacy countrywide issued first-lien residential mortgage-backed securitization repurchase exposure representing 530 trusts with original balance of $US424b. Bank of America says it will set aside $US14b to settle claims for angry investors for losses on dodgy mortgaged-backed securities whose collapsed triggered the 2008 financial crisis.

Bank of America, the largest bank in the United States in terms of deposits, has been dogged by questions about how much the mess stemming from its countrywide acquisition would ultimately cost.

The huge settlement may encourage new lawsuits against other banks that also sold risky mortgage-backed securities before the crisis. Bank of America said it would report a net loss in the second quarter of up to $US9.1 billion ($A8.67 billion), a sharp reversal from the first quarter’s $US1.7 billion ($A1.62 billion) gain.

The bank posted a net loss of $US2.2 billion ($A2.1 billion) last year, after huge write-offs mostly related to housing.

Rating Agency Moody’s investors service said the settlement cost more than expected but that it cleared out the looming liability that had weighed on Bank of America’s credit ratings.

Report by Vibhanshu Vibhav