Fitch Ratings may cut Bank of America Corp.'s viability rating one notch if certain concerns regarding the company's exposure to the residential mortgage business are worse than what the ratings agency expects.
Fitch said it is worried about the size of B of A's litigation risk as well as its weaker capitalization, when compared with its competition. Fitch announced the possible cut on Wednesday.
At the time of the June settlement related to mortgage-backed securities issued by Countrywide, Fitch affirmed B of A ratings, based on expectations that it would clarify potential losses because of representations and warranties and provide clarity.
But there is uncertainty regarding court approval of the settlement. In addition, B of A is facing other legal issues, including suits or potential litigation involving American International Group, state attorney generals and the Federal Housing Finance Agency.
Fitch said it is planning to meet with B of A and any affirmation of the current "a-" viability rating could depend on favorable resolution of the litigation risk, among other factors.
