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Bank Of America Can’t Escape Mortgage Problems
Countrywide Financial is like a bad virus Bank of America can’t seem to shake- and a pricey one at that.
The worst acquisition ever made by Bank of America continues to hurt the bank’s chances of a full recovery. The remnants of the Countrywide deal are still being felt as Sanford C. Bernstein analysts noted that BofA could face another $27 billion of housing losses between now and 2013. That’s on top of the $46 billion the bank has put up so far.
That’s not all. An official with the U.S. Department of Housing and Urban and Developement said BofA is purposefully dragging its feet amidst a federal investigation of its foreclosure practices.
In a filing with a Phoenix court assistant regional inspector general, William Nixon, stated that Bank of America “significantly hindered” its investigation in many instances including when BofA lawyers refused to “allow employees to answer questions about foreclosure procedures.
U.S. regulators and state attorneys general have been probing banks’ mortgage business one just about every front. Some are looking at the way banks packaged and sold securities that were backed by mortgages, others are looking at how defaulting homeowners were denied loan modifications and some regulators are investigating whether homeowners were forced out of the their homes improperly by so-called robo-signers.
The attorneys general of New York and California have both individually announced investigations into banks’ mortgage issues. Their investigations appear to be separate from the ongoing probe by all 50 state’s attorneys general. The group investigation appears to be nearing some kind of settlement but New York Attorney General Eric Schneiderman wants to make sure any national settlement doesn’t preclude his state from going after banks separately.
On May 23, California Attorney General Kamala Harris announced she was assembling a platoon of Department of Justice lawyers and investigators to examine and prosecute violations in the mortgage industry. A so-called Mortgage Fraud Strike Force is charged with “protecting innocent homeowners and bringing to justice those who defraud them,” according to the California AG’s office.
For Bank of America the bad news related to its mortgage business appears never-ending. Analysts have little faith in BofA’s ability to pull through the mortgage mess quickly. Sanford C. Bernstein analysts said in a note yesterday, “The process of addressing legacy mortgage issues will be long and arduous.”
Bank analyst Mike Mayo of Credit Agricole Securities USA in New York said in a note yesterday that BofA will likely settle with investors who bought its soured mortgage securities for about $7 billion
Meanwhile, Nixon’s office is getting a taste of what appears to be some shoddy customer service from BofA and likely what some foreclosed-on-homeowners might have already experienced with the bank. He said in his statement that the bank was slow in preparing requested paperwork and that it was “unnecessarily burdening us with work.”
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As Halah points out, BofA has a huge anchor their dragging, bad mortgages. Compounding their problems is investor dissatisfaction with their handling of the problem and the Fed’s have stopped feeding them HARP funding because they just can’t handle the problem. BofA has an “Legacy Asset Servicing” department ran by Mr. Laughlin, but when I call BofA and offer to buy every single bad mortgage they have, they deny the department even exits…go figure. As a private company we can solve their problem and raise their stock prices dramatically since investors will no longer have to worry about it and the Fed’s will back off. Selling these assets to Ocwen, a $46B company like Goldman Sachs did is just “kicking the can”. And now Ocwen has their sights on the other big banks with the same bad mortgages. What’s wrong with this picture? Guess who is also on the “Needs Substantial Improvement” list and is danger of losing their HARP funding…you guessed it, Ocwen. I bet homeowners can’t wait to deal with another giant. If the big banks would talk to private companies by ANSWERING THE PHONE, I would buy them out of misery, or they can just sit back and watch their stock continue to drop. I’m waiting. Thanks Halah.