Showing posts with label troubles. Show all posts
Showing posts with label troubles. Show all posts

Saturday, July 30, 2011

BofA legal troubles deepen as big investors sue (Reuters)

NEW YORK (Reuters) – Bank of America Corp (BAC.N) was sued by 15 former Countrywide Financial Corp institutional investors who said they lost money after being misled about the mortgage lender's financial condition and lending practices.

BlackRock Inc (BLK.N), the California Public Employees' Retirement System (CalPERS), T Rowe Price Group Inc (TROW.O), TIAA-CREF and the other plaintiffs, including some in Europe, sued in Los Angeles federal court, after deciding not to join a $624 million settlement that won court approval in February.

These plaintiffs believed they could recover more by suing on their own over the "massive and pervasive" fraud at Countrywide, which Bank of America bought on July 1, 2008.

Thursday's lawsuit deepens the legal problems for Bank of America over Countrywide, for which it paid $2.5 billion. Analysts have estimated that its ultimate cost, including legal bills and loan losses, could easily exceed 10 times that sum.

Last month, the Charlotte, North Carolina-based bank entered an $8.5 billion agreement to end most litigation by investors who bought securities backed by risky Countrywide home loans. Some of those investors have complained this agreement too may be unfair.

According to the 425-page complaint by the 15 plaintiffs, Countrywide and officials like former Chief Executive Angelo Mozilo abandoned prudent lending, reserved too little for bad loans and inflated earnings, in a drive to triple market share to 30 percent and enrich themselves.

Top executives "were fully aware of but failed to disclose, and in fact expressly authorized and engaged in, Countrywide's risky lending," the complaint said.

Countrywide shares ultimately sank more than 90 percent from their peak as losses from its subprime, pay-option and other risky mortgages began to pile up.

Bill Halldin, a Bank of America spokesman, said: "It is unfortunate that select investors chose to opt out of a fair and equitable agreement to settle these issues. We intend to vigorously defend these claims."

"UNFORTUNATE," BANK SAYS

The plaintiffs seek unspecified damages and class-action status for the March 12, 2004 to March 7, 2008 period.

They are also seeking a jury trial, and to "maximize the recovery of their damages," their lawyer Blair Nicholas, a partner at Bernstein Litowitz Berger & Grossmann, said.

Other defendants include former Chief Operating Officer David Sambol and former Chief Financial Officer Eric Sieracki, and former auditor KPMG LLP.

Lawyers for the former executives did not return requests for comment. KPMG spokesman Dan Ginsburg declined to comment.

The February 25 settlement approved by U.S. District Judge Mariana Pfaelzer in Los Angeles called for Bank of America to pay $601.5 million to former Countrywide investors, and set aside $22.5 million for claims of investors that opted out.

That money would go to investors in the earlier settlement if it is not used within two years.

Mozilo last October reached a $67.5 million settlement of a U.S. Securities and Exchange Commission civil fraud lawsuit accusing him of misleading investors and generating improper gains from stock sales. He did not admit wrongdoing.

Bank of America shares have fallen close to 60 percent since it bought Countrywide, roughly three times as much as the KBW Bank Index (.BKX). In afternoon trading, the shares were unchanged at $9.79.

(Reporting by Jonathan Stempel; Editing by Phil Berlowitz)


Browse your computer here

Friday, April 22, 2011

BofA finds it hard to shake off mortgage troubles (AP)

NEW YORK – Bank of America Corp. is still trying to shake off troubles arising from mortgages written during the housing bubble.

Higher fees from battling lawsuits and costs related to its mortgage business led to a 39 percent decline in BofA's first-quarter earnings, the bank announced Friday. It wasn't what investors wanted to hear, since just three months ago the bank announced several big charges and settlements that seemed to resolve many of its mortgage problems.

"It seems like some of the mortgage-related issues that they said were behind them are actually not behind them yet," said Paul Miller, a bank analyst at FBR Capital Markets.

The bank is fighting lawsuits from investors and insurers who say that during the housing bubble they were duped into buying loans that were based on fraudulent documents. Bank of America set aside $1 billion to repurchase those mortgages and also added $352 million to its legal expenses in the first quarter. The bank had already taken a $4.1 billion expense in the previous quarter for mortgage repurchase claims and $1.5 billion for litigation expenses.

"The numbers are getting worse and nobody seems to have a handle on how bad this could be," said Miller.

BofA's stock fell 2.4 percent to $12.82. Bank of America has lost 34 percent of its value over the past year, making it the laggard among major banks.

The Charlotte, N.C. bank earned $1.7 billion, or 17 cents per share, compared with $2.8 billion, or 28 cents a share in the first quarter of last year. Revenue fell to $26.9 billion from $32 billion in the same period last year.

Most banks will likely have to pay more fees and fines in the future for investigations on other mortgage-related issues. Bank of America and other banks are waiting for a decision from the attorneys general of all 50 states who are investigating allegations that the banks bungled foreclosure documents, and a separate decision from the Securities and Exchange Commission on its probe into misleading mortgage-backed investments.

On Wednesday, Bank of America was among 16 of the nation's largest mortgage lenders who were directed by the Federal Reserve and other federal banking regulators to reimburse homeowners who were improperly foreclosed upon. The Fed warned of more fines in the future.

Separately, Bank of America paid $1.1 billion in cash to Assured Guaranty Ltd., an insurer that also said the bank should repurchase its shoddy mortgages. The bank also entered into an agreement worth $470 million to share losses on insuring additional mortgages. Assured Guaranty's stock jumped 24 percent to $17.60 after the news came out.

Much of Bank of America's mortgage-related woes stem from its 2008 acquisition of Countrywide Financial Corp., once the largest U.S. mortgage lender, which was facing bankruptcy after payment defaults and foreclosures.

Last month, Bank of America suffered another setback when it became the only one of the four largest U.S. banks that wasn't allowed by the Federal Reserve to increase its dividends. Moynihan had promised investors that he would increase dividends in the second half of the year.

Along with the 19 largest banks in the country, Bank of America was subjected to a "stress test" by the Federal Reserve to see if they were strong enough to stand up to another economic downturn. Only banks that passed the test were allowed to increase dividends. The Fed has asked the bank to submit a revised plan.

Brian Moynihan, CEO of Bank of America, tried to cast his bank's results in a positive light. "All the businesses have moved back to profitability except our mortgage business," he said in a conference call with analysts. BofA's Merrill Lynch division set records for revenue, asset management fees and brokerage income.

As the largest U.S. bank serving about half of the nation's households, Bank of America also provides a snapshot for the health of the American consumer and the overall economy. The bank said the number of customers who were late on their credit card payments by 30 days or more fell to near all-time lows in the first quarter. It was the sixth straight quarterly decline.

The bank set aside a total of $3.8 billion to cover losses from loans in the quarter, down sharply from $9.8 billion in the same period a year ago. That reflects an improving economy and fewer BofA customers falling behind on their debts.

The nation's largest bank by assets also announced that its chief risk officer, Bruce Thompson, will become chief financial officer, replacing Chuck Noski, who was named vice chairman. Noski couldn't relocate to Charlotte to fulfill his CFO duties because of an illness of a close family member, the bank said in a statement.


Browse your computer here

Monday, April 18, 2011

BofA finds it hard to shake off mortgage troubles (AP)

NEW YORK – Bank of America Corp. is still trying to shake off troubles arising from mortgages written during the housing bubble.

Higher fees from battling lawsuits and costs related to its mortgage business led to a 39 percent decline in BofA's first-quarter earnings, the bank announced Friday. It wasn't what investors wanted to hear, since just three months ago the bank announced several big charges and settlements that seemed to resolve many of its mortgage problems.

"It seems like some of the mortgage-related issues that they said were behind them are actually not behind them yet," said Paul Miller, a bank analyst at FBR Capital Markets.

The bank is fighting lawsuits from investors and insurers who say that during the housing bubble they were duped into buying loans that were based on fraudulent documents. Bank of America set aside $1 billion to repurchase those mortgages and also added $352 million to its legal expenses in the first quarter. The bank had already taken a $4.1 billion expense in the previous quarter for mortgage repurchase claims and $1.5 billion for litigation expenses.

"The numbers are getting worse and nobody seems to have a handle on how bad this could be," said Miller.

BofA's stock fell 2.4 percent to $12.82. Bank of America has lost 34 percent of its value over the past year, making it the laggard among major banks.

The Charlotte, N.C. bank earned $1.7 billion, or 17 cents per share, compared with $2.8 billion, or 28 cents a share in the first quarter of last year. Revenue fell to $26.9 billion from $32 billion in the same period last year.

Most banks will likely have to pay more fees and fines in the future for investigations on other mortgage-related issues. Bank of America and other banks are waiting for a decision from the attorneys general of all 50 states who are investigating allegations that the banks bungled foreclosure documents, and a separate decision from the Securities and Exchange Commission on its probe into misleading mortgage-backed investments.

On Wednesday, Bank of America was among 16 of the nation's largest mortgage lenders who were directed by the Federal Reserve and other federal banking regulators to reimburse homeowners who were improperly foreclosed upon. The Fed warned of more fines in the future.

Separately, Bank of America paid $1.1 billion in cash to Assured Guaranty Ltd., an insurer that also said the bank should repurchase its shoddy mortgages. The bank also entered into an agreement worth $470 million to share losses on insuring additional mortgages. Assured Guaranty's stock jumped 24 percent to $17.60 after the news came out.

Much of Bank of America's mortgage-related woes stem from its 2008 acquisition of Countrywide Financial Corp., once the largest U.S. mortgage lender, which was facing bankruptcy after payment defaults and foreclosures.

Last month, Bank of America suffered another setback when it became the only one of the four largest U.S. banks that wasn't allowed by the Federal Reserve to increase its dividends. Moynihan had promised investors that he would increase dividends in the second half of the year.

Along with the 19 largest banks in the country, Bank of America was subjected to a "stress test" by the Federal Reserve to see if they were strong enough to stand up to another economic downturn. Only banks that passed the test were allowed to increase dividends. The Fed has asked the bank to submit a revised plan.

Brian Moynihan, CEO of Bank of America, tried to cast his bank's results in a positive light. "All the businesses have moved back to profitability except our mortgage business," he said in a conference call with analysts. BofA's Merrill Lynch division set records for revenue, asset management fees and brokerage income.

As the largest U.S. bank serving about half of the nation's households, Bank of America also provides a snapshot for the health of the American consumer and the overall economy. The bank said the number of customers who were late on their credit card payments by 30 days or more fell to near all-time lows in the first quarter. It was the sixth straight quarterly decline.

The bank set aside a total of $3.8 billion to cover losses from loans in the quarter, down sharply from $9.8 billion in the same period a year ago. That reflects an improving economy and fewer BofA customers falling behind on their debts.

The nation's largest bank by assets also announced that its chief risk officer, Bruce Thompson, will become chief financial officer, replacing Chuck Noski, who was named vice chairman. Noski couldn't relocate to Charlotte to fulfill his CFO duties because of an illness of a close family member, the bank said in a statement.


Browse your computer here