BofA battles over refunds, CEO says

Bank of America Corp. Chief Executive Officer Brian T. Moynihan said resolving investor demands for refunds over faulty mortgages is a battle that will last at least several more quarters.

“It’s a day-to-day, hand-to-hand combat,” Moynihan said Wednesday during an investor conference held by the lender in New York. “It’s manageable in the context of who we are, but we’re not going to spend your money unwisely.”

Moynihan’s comments highlight the tensions between Bank of America, the biggest U.S. lender, and clients who bought its mortgages or bet on securities backed by home loans. The Charlotte, North Carolina-based company faces demands to repurchase almost $13 billion of loans that may have failed to document required data such as income and home values.

Bank of America has said it would review claims “loan-by-loan” to protect shareholders as Fannie Mae, bond insurers and private investors press for so-called putbacks. Some of the claims stem from loans made by Countrywide Financial Corp., the mortgage lender Bank of America acquired in 2008.

“There’s a lot of people out there with a lot of thoughts about how we should solve this, but at the end of the day, we’ll pay for the things that Countrywide did,” said Moynihan, 51.

The bank’s resistance has rankled lawmakers and business partners, with Dominic Frederico, chief executive of Assured Guaranty, saying in August that settlement talks with BofA were “like Chinese water torture.” In an August letter to President Barack Obama, Rep. Barney Frank, the Massachusetts Democrat who leads the House Financial Services Committee, said the battle to get refunds “should be fought with every tool” to ensure that Fannie Mae and Freddie Mac recover money from banks on improperly written loans.

Insurers are negotiating repurchases and suing firms including Bank of America as they seek to recover from losses on mortgage-security guarantees. The bank is the largest servicer of U.S. home mortgages and second-biggest originator of loans after Wells Fargo & Co.

The company expects costs tied to resolving loan disputes averaging $500 million each quarter for “the next couple of years or so,” according to an Oct. 19 conference call.

With assistance from Clea Benson and Lorraine Woellert in Washington, D.C.