Is Bank of America’s $10 Billion Estimate Too Low?

Ten days ago, Bloomberg reported that Bank of America, which had set aside $4.1 billion in the fourth quarter of 2010 to resolve disputes over faulty mortgages, believed that an additional $7-10 billion might be required to settle remaining outstanding claims. 

CFO Charles Noski called the $7-10 billion figure the “upper range” and emphasized that the number was only a possibility not a probability.

However, that conference call took place days before New York Life and other investors sued Countrywide and Bank of America, alleging fraud, non-compliance with applicable state laws and PSAs and failure to transfer good title.

With investors going on record acknowledging that they don’t have the legal right to enforce on defaulted mortgages and focusing on Bank of America for recompense, the real extent of BoA’s liability remains to be seen.