Bank of America - Mortgage Data (Reps and Warranties)

BAC released earnings this morning (they beat) and rather than focus on the earnings and the segment revs and earnings, I wanted to address the reps and warranties issues (aka the mortgage mess).

From the investor presentation (full presentation here:  BAC Investor Presentation);

Outstanding claims increased by $1.7B from Q2 to Q3.  The pace of growth slowed due to a slowdown in monoline claims.

Now that we have a claim number (or a snapshot of 9/30s claim number), lets look at what they have reserved for these claims:

The provision for reps and warranties has dropped due to a reduction in monoline provisioning.  Using these numbers, BAC is holding about 30% of the claims in reserves.


Whole Loan Investors/Private Label Securitizations
$3.9 billion of repurchase claims received through 9/30/10; $1.0 billion remain outstanding of which $0.5 billion already reviewed and declined to repurchase;  Approximately $1.0 billion approved for repurchase. 
This seems to point to a repurchase rate of approximately 50%. Claims received to date equate to approximately 86bps of the outstanding balance thus far.

Private Label Securities wrapped by monolines
As of 9/30/10, $4.8B of repurchase claims received; $4.2B remain outstanding of which $2.7B already reviewed and declined to repurchase;  Approximately $550M approved for repurchase.
It looks like a "declined" rate of around 65%, will probably head higher, lets call it a 70% "declined" rate, which should imply a 30% "approved" rate. As an aside, the claims equate to approximately 6% of outstanding loans.


$1.2T loans sold to GSE's, $18B of claims received to date (1.5%).  Does 30% provisioning rate seem enough?  No, it doesn't.