BofA (probably it was Country-wide before it was purchased by BofA) originated loans and then sold these to loans either through Mortgage Backed Securities (MBS) or through Fannie Mae and Freddie Mac.
More than half of the soured home-equity credit lines and residential mortgages created from 2005 through 2007 that insurers examined should be bought back, the Association of Financial Guaranty Insurers said in a Sept. 2 letter to Bank of America Chief Executive Officer Brian T. Moynihan. Ambac Financial Group Inc. and Assured Guaranty Ltd. are members, and the group said repurchases may total $10 billion to $20 billion.
BofA then originated these loans and sold them to other agencies. However, it looks like some of these loans might not have been 100% accurate and the buyers are seeking buybacks.
Banks are dealing with demands for repurchases from buyers and insurers of mortgage securities who say that the loans were created with false, misleading or missing data. Repurchases have already cost the four biggest U.S. lenders $9.8 billion, according to Credit Suisse Group AG. Bank of America has said it faces $11.1 billion of unresolved claims, which it reviews on a “loan-by-loan” basis.
Some of these costs have been burden by the tax payers. However, (in my opinion) if the bank had to shoulder the pain with the tax payers (or banks should handle all the costs), then maybe future loans will have be scrutinize more when they are underwritten. However, currently Fannie Mae is has a sub-prime program, along with FHA, so it looks like history may repeat itself.