SEC probed BofA mortgage repurchases

Securities regulators have made inquiries into the mortgage repurchase practices at Bank of America Corp’s Countrywide unit, according to a transcript filed in a lawsuit against the bank by insurer MBIA Inc.

The details of the inquiries, which had not been previously disclosed, were included in documents filed this week.

It is unclear if the SEC continues to investigate the matter, but the documents reveal the agency's interest dating back to at least 2010 in an issue that has already saddled the second-largest US bank with billions of dollars of losses in the wake of the financial crisis.

According to the documents, the US Securities and Exchange Commission requested a meeting with the bank to discuss its representations and warranties process, according to the documents.

 

When selling the mortgages, banks made promises or “representations and warranties” about the loans. Investors can ask banks to buy back soured mortgages if these promises were evidently broken, for reasons such as poor underwriting, insufficient verification of income or other documentation errors.

The SEC also asked about reserves for mortgage repurchase requests, a bank employee testified.