Before You Get Excited About Bank Of America's Big Putback Settlement...

Brian Moynihan Bank Of America

Earlier, we told you Bank of America had come to a deal with Fannie and Freddie that would eliminate a significant portion of its mortgage putback risk.

But that deal isn’t enough to deal with Bank of America’s entire problem.

In fact, the deal doesn’t even cover the bank’s full set of potential problems with Freddie of Fannie.

From Oppenheimer: “The agreement with Freddie Mac seems more comprehensive and covers all loans made by BAC’s Countrywide Unit up to 2008. The agreement with Fannie Mae seems less comprehensive (i.e., it does not limit the total exposure in the same way) but it cleared out $3.1B of the existing $5.2B backlog of unresolved claims, leaving $2.1B. In connection with the agreements, BAC will take a $3.0B provision and pay out $2.8B to the GSEs.”

And while these deals are definitely good news for Bank of America, they don’t include the company’s exposure to monoline insurers and other private label securitizations, according to Oppenheimer.

The Association of Financial Guaranty Insurers (the monoline insurers) believe Bank of America owe them $10 to $20 billion. A group including PIMCO and the New York Fed are suing Bank of America, claiming the firm owes them up to $47 billion.

Today’s deal could be only the beginning of a very costly settlement process for Bank of America.

For a full overview of Bank of America’s mortgage putback exposure click here >

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