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MBIA Inc. Message Board

  • nilsdegraaf nilsdegraaf Jan 21, 2011 10:47 AM Flag


    After the GSE settlements BofA has still $5,438 bn reserved for reps & warranty breaches, an 1,1bn last quarter increase.

    This is a lot of money.

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    • ... and last, the implicit reasoning why BofA will winn the Reps & warranties cases:

      • "58% ($126B) of defaulted or severely delinquent loans made at least 25 payments prior to default or delinquency
      –Only a portion of these defaulted or severely delinquent loans will be the subject of a repurchase demand and only a portion of those would ultimately be repurchased"

      So if the borrower has paid for 25 months, breaches of R&W do not matter anymore. I assume these breaches are being "rescinded" by BofA.

    • A preliminary estimate of possible upper range of [mortgage repurchase] loss could be up to $7B to $10B over existing accruals
      •It does not represent a probable loss
      •It is based on current assumptions and is necessarily subject to change
      •A significant portion of this possible range of loss relates to loans originated through Countrywide prior to our acquisition

      • 1 Reply to nilsdegraaf
      • It is good to see someone on the long side thinking about things. It looks like most have completely abandoned thinking and are now in a rabid frenzy or delusional fantasy.

        The $7B to $10B is probably more like a realistic low end than a possible upper range. Even so, this is a drop in the bucket compared to the losses on loans that Countrywide, B of A, and Merril underwrote during the bubble years, probably around $250B. MBIA's rights are similar or worse than other parties that have taken these losses, so MBIA's share of ultimate recoveries should not be much greater than the overall average. If B of A ultimately needs to cough up $25B, that's 10 cents on the dollar, vs. the 30-40 cents that MBIA is accruing.

        You will probably convince yourself that MBIA will recover a much higher percentage of loan losses than others. If so, please share your thinking.

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