Thursday, December 16, 2010

Bank of America (NYSE:BAC) Gets Deadline Extension in Putback Battle

Growing pressure from large institutional investors for Bank of America (NYSE:BAC) to buy back billions in bad mortgages has put the giant bank on the defensive, but they have received some respite from bondholders who say they can wait as long as "constructive" talks continue.

Bank of America would rather settle than enter litigation, as the discovery process could reveal a number of embarrassments and other unknown revelations that would be associated with former mortgage giant Countrywide.

The problem with a settlement is bondholders not participating would be at a disadvantage to those that did. Consequently the number of bondholders joining the initiative is growing. So far 17 firms have joined together to press Bank of America on the issue.

CEO of Bank of America, Brian T. Moynihan, is ready to fight, as he said in November he would enter “hand-to-hand combat” against Fannie Mae and Freddie Mac buyback demands, along with private investors and bond insurers wanting to have the loans returned.

Putback claims that are pending have risen from $7.7 at the end of 2009 to $12.9 billion as of September 30, 2010.

Jerry Dubrowski, a spokesman for Charlotte, North Carolina-based Bank of America, said, “The extension will go on as long as the parties are engaged in a constructive discussion. As we have said all along, if there is a valid claim, we will act responsibly. If there is no defect, we will defend our interests and the interests of our shareholders.”

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