Reports suggest that Bank of America is indicating further reserve expenses for private label and monoline reps and warranties. Monoline and bank stocks have outperformed over the past two days.
A presentation by BofA Legacy Asset Servicing Executive Terry Laughlin contains the bullet point on non-GSE repurchase losses:
“Estimate of upper range of possible loss could be up to $7B to $10B over existing accruals - this does not represent a probable loss.”
Bank of America ended 2010 with $5.4B in total reps and warranties loss reserves. This number includes GSE exposure, but BofA did settle much of its exposure with the GSE’s prior to year end.
Another presentation by Chuck Noski, the bank's CFO indicated that the company’s “Rep and warranties costs expected to be lumpy in 2011.”
None of these presentations or any of the comments reportedly coming from the investor day is inconsistent with very high monoline recoveries. The past two days of stock performance suggest that there is plenty of room for both sides of this mess to benefit from these developments – a continuing theme at The Blue Dragon.