BofA’s ‘sloppy’ prime mortgages add to pressure for buybacks
Bank of America Corp., battling demands for almost $13 billion of refunds from mortgage investors, reported that the fastest-growing group of claims involves loans to people with the best credit scores. Claims for refunds on prime mortgages surged 150 percent to $3.6 billion in the first nine months of 2010, the Charlotte, North Carolina-based bank said last month in its quarterly report. Claims on subprime loans, made to borrowers deemed more likely to default, were little changed at $579 million. Mortgage investors can demand refunds from a bank if a loan was based on faulty data about the home or borrower. Overdue prime mortgages set a record this year, opening more loans to scrutiny for defects that could entitle investors to a buyback. The Congressional Oversight Panel said last month that too many repurchases could rattle the financial system, and Bank of America’s stock dropped 27 percent this year through yesterday, partly on concern that $4.4 billion of reserves stockpiled to cover such costs won’t be enough.