Bank of America Corp., during an earnings conference call with analysts, pinned an upper bound to its risk of loss from litigation over private-label, mortgage-backed securities: $7 billion to $10 billion.
That amount, announced along with the company's fourth-quarter results, does not represent what B of A expects it would have to pay to resolve such claims, the company's executives said.
Instead, it was produced in response to investor demands that it quantify the maximum exposure and the wide-ranging liability estimates that have recently been circulated by analysts. (Some analysts believe the exposure could be much less than those numbers or even zero.)
The company will not be setting aside reserves to cover that potential hit, CEO Brian Moynihan said, because the likelihood of being forced to pay those claims is too small to be considered "probable" and thus accounted for.
"As a reminder, there are significant procedural hurdles that parties would have to overcome before any of these amounts become probable," Moynihan said.
B of A's PLS exposure is, in large part, tied to Countrywide Financial Corp., which it bought in August 2008. CFC was a top ranked subprime lender and issuer of ABS.
Attorneys for investors that bought some of the CFC-issued ABS/MBS are trying to recoup their losses on the securities, which range in the billions of dollars.
