Bank of America Sees Mortgage Claims Skyrocket

NEW YORK (TheStreet) -- Bank of America(BAC) saw a 73% rise in new mortgage-related claims in the second quarter as new claims from private investors rose to$8.6 billion from $4.9 billion in the first quarter.

Overall new mortgage claims were $8.21 billion, compared to $4.8 billion in each of the last two quarters and $3.8 billion in the second and third quarters of 2011.

Disputes over mortgage-related securities have been a severe drag on bank earnings for nearly two years, though Bank of America has been the hardest hit by far. Most of the trouble has come from its Countrywide Financial unit. Bank of America bought Countrywide in 2008.

During a tense conference call Wednesday during which time Bank of America shares moved steadily lower despite a rising market, CFO Bruce Thompson appeared unsuccessful at allaying analyst concerns. Thompson said the increase was "primarily due to claims we received from trustees that we fully anticipated at time of the Bank of New York Mellon Corp.(BK) settlement a year ago and were largely reflected in the increase in reserves at that time."

Thompson was referring to a proposed $8.5 billion settlement between Bank of America and several large institutions, including Goldman Sachs(GS) ,BlackRock(BLK) PIMCO and the Federal Reserve Bank of New York, among others. The settlement has been opposed by several parties including the New York State attorney general.

In addition to the rise in claims from private investors and institutions, disputes from government sponsored enterprises (GSEs) Freddie Mac(FMCC) and Fannie Mae(FNMA) rose by $2.9 billion.

Bank of America now has $22.7 billion in outstanding claims over mortgage-related disputes, up from $16.1 billion at the end of the first quarter.

Citing the tougher tactics by the GSEs and still-unresolved private litigation, FBR Capital Markets analyst Paul Miller raised his mortgage-related loss estimates to $53 billion from $42 billion in a research note published June 22.