Home > Bank of America Corp. (NYSE:BAC) Not Out Of The Woods On Deal
Print

Bank of America Corp. (NYSE:BAC) Not Out Of The Woods On Deal

January 8th, 2013

bank of americaDiane Alter: About five years after the housing market crumbled, Bank of America Corp. (NYSE:BAC) has taken a major step toward resolving federal allegations it had improperly handled mortgages. 

The Charlotte, N.C.-based bank announced today (Monday) it had reached a $10.4 billion settlement with federal mortgage issuer Fannie Mae, resolving all of Bank of America’s disputes with Fannie.

BofA, which had been one of 14 banks negotiating with federal prosecutors over foreclosure abuses, settled its battle with housing finance giant Freddie Mac in 2011.

Have you ever wondered how billionaires continue to get RICHER, while the rest of the world is struggling?


"I study billionaires for a living. To be more specific, I study how these investors generate such huge and consistent profits in the stock markets -- year-in and year-out."

CLICK HERE to get your Free E-Book, “The Little Black Book Of Billionaires Secrets”

Under the latest settlement, Bank of America will pay $3.65 billion to settle claims related to the sale and delivery of certain residential mortgage loans. Plus, the bank will repurchase at a discounted price $6.75 billion worth of residential mortgage loans it sold to Fannie Mae.

BofA also said it has agreed to sell the servicing rights on some 2 million expensive residential loans, worth about $306 billion, that are chipping away at the value of the banking giant’s stressed portfolio.

In a statement, Bank of America CEO Brian Moynihan said, “Together, these agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time.”

Bank of America Mortgage Deal

The settled claims stem from loans BofA and the now-defunct Countrywide Financial issued from Jan. 1, 2000, through Dec. 31, 2008.

Bank of America bought ailing Countrywide in January 2008 in an all-stock deal. A couple of months later, news broke that the FBI was investigating Countrywide for possible fraud relating to home loans and mortgages.

The acquisition gave BofA a substantial chunk of the nation’s mortgage business plus Countrywide’s resources for servicing mortgages.

But the timing couldn’t have been worse for Bank of America. The deal closed shortly before the financial meltdown, sparked by the implosion of the residential real estate market.

The settlement lifts a dark cloud that has been hanging over Bank of America.

Shares of BofA staged a remarkable comeback in 2012, when it was one of the best-performing stocks, gaining more than 100%.

Bank of America (NYSE: BAC) Not Out of the Woods

But BofA still needs to pay $8.5 billion to investors, including heavyweights like the Federal Reserve Bank of New York and PIMCO Funds, which sued over losses when the bank bundled troubled mortgages into securities that later went bust.

BofA had agreed to pay the $8.5 billion, but a settlement that was to close last year has been stalled.

The bank also could face a $1 billion settlement stemming from a suit filed by federal prosecutors in October accusing the bank of robo-signing loans, whipping through loans so swiftly that pertinent checks and balances were avoided.

The latest settlement is expected to weigh on earnings in the fourth quarter to the tune of $2.5 billion, the bank says, due to costs related to foreclosure reviews and litigation.

In addition, the bank expects to record a $700 million charge as it adjusts its bond prices in a move called debt-valuation adjustment.

The tax benefits and debt-valuation changes, however, should allow fourth-quarter earnings, set to be released on Jan. 17, to be “modestly positive.” The bank is projecting pretax income to come in at $3.5 billion and net income at $2.3 billion.

“We are resolving legacy mortgage issues while balancing the needs of our customers, mortgage investors, our shareholders and communities,” Rod Sturzenegger, a BofA legacy asset servicing executive, told FOX Business Network.

The bank is optimistic about its future profitability and so is S&P Capital IQ, which boosted BofA shares to a “Hold” from a “Sell” and raised its price target to $13.

By 2 p.m., shares of Bank of America, which reached a 52-week high of $12.20 early in the trading session, were down just 0.18% to $12.09.

Money-MorningWritten By Diane Alter From Money Morning

We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the flattening of the world continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially; and a technological revolution even in the most distant markets on the planet.And Money Morning is here to help investors profit handsomely on this seismic shift in theglobal economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.


Economy, Financials, Government, Markets



Tags: , , , , , , , , , ,

Facebook Comments

Comments



  1. No comments yet.
  1. No trackbacks yet.

Copyright 2009-2013 MarketDailyNews.COM

LOG