Bank of America has agreed to buy back investments to the tune of $8.5 billion. Image: MoneyBlogNews/Flickr/CC BY

Bank of America Corp. agreed Wednesday to pay out $8.5 billion to investors who lost on mortgage-backed securities purchased from the lender. The blue chip investors claim the securities were of poor quality. The investments tanked when the bottom fell out of the housing industry. The payout could pave the way for some mortgage-related investors to bring action against other banks.

Investments of poor quality

The dispute started last fall when Bank of America received a letter from 22 investors. The letter claimed that mortgage-backed securities they bought from Countrywide Financial Corp. before the financial crisis did not meet the seller’s promises about the quality of the borrowers or of the collateral. The Charlotte, N.C. based bank acquired Countrywide Financial in 2008 for $4 billion.

The investors, which include BlackRock Inc., MetLife Inc., Pimco Investment Management and the Federal Reserve Bank of New York, paid out $105 billion total for the investments. The original face value of all the bonds covered in the deal totaled $424 billion. The investors were asking for $47 billion of the bonds to be bought back.

Not B of A’s first buyback this year

Bank of America already paid out $2.6 billion in buybacks to Fannie Mae and Freddie Mac in January, and $1.6 billion to insurance provider Assured Guarantee Ltd. in April. Because of these added expenses, the bank expects to report a net loss of $8.6 billion to $9.1 billion in the second quarter of this year.

CEO could be in hot water

The mortgage buyback deal is the largest ever in the U.S.  The Wall Street Journal speculates that the bank’s CEO, Brian Moynihan, who acquired the top job only a year and a half ago, may have reason to fear for his position. Last year, Moynihan vowed to fight “day-to-day, hand-to-hand combat” against investor buybacks and to “not just do a settlement to move the matter behind us.”

May pave the way for other buybacks

The precedent of this buyback deal may lead to others, says the Wall Street Journal. Investment holders, who feel their mortgage-backed securities didn’t perform the way they were promised may decide to seek similar deals with other major U.S. banks. Bank of America, JPMorgan Chase and Wells Fargo banks collect payments for about half of all outstanding mortgages in the U.S.

Sources

CBS
Wall Street Journal
AOL News

Bank of America recently settled a massive class action lawsuit concerning overdraft fees. Photo Credit: MoneyBlogNewz/Flickr/CC-BY

Bank of America has reached a settlement in a huge lawsuit that involves most large retail banks in the United States. B of A has agreed to pay $410 million to settle a class action lawsuit over aggressive overdraft fee practices. Similar suits are being filed against other banks.

Dozens of banks sued for account fees

Overdraft fees and account fees are not popular among consumers, and outrage over fee practices has led to major class action lawsuits against some of the largest financial institutions in the United States and Canada. Nearly 1 million people are part of  a massive class action suit, according to Bloomberg, against Bank of America, and similar suits have been filed against JPMorgan Chase, Citigroup and Wells Fargo. Bank of America has won approval to settle for about $410 million. More than two dozen banks from the U.S., Canada and Europe are being sued for overdraft fees, according to Reuters, and the cases were all consolidated into one massive class action. The case is titled In Re: Checking Account Overdraft Litigation.

Undue burden placed on vulnerable consumers

Bank of America is alleged to have processed transactions from largest to smallest instead of by when the transactions were made, thus making it more probable that accounts would fall into overdraft and the sum recovered by the banks would be greater. Overdrafts can function like short term credit; the bank will fund the transaction but add a fee to the amount owed by the account holder. Fees vary by institution, though fees between $25 and $35 are common. Many consumer advocates consider overdraft protections and fees to be abusive to less fortunate consumers. Banks can no longer enroll customers into an overdraft protection program automatically; customers have to elect to enroll.

B of A going mobile

Bank of America is unveiling a pilot program involving mobile banking, according to the Los Angeles Times. If a transaction is declined for insufficient funds, the customer will receive a text message giving the customer the option to have the bank cover the overdraft. If the customer elects to do so, the customer can deposit the required funds by 8 p.m. that evening to avoid the overdraft charge of $35. The option would only apply to that transaction. Overdraft fees will become the province of the Consumer Financial Protection Bureau, according to the New York Times, when the agency begins operation. The CFPB is involved in an ongoing Congressional tug-of-war over the director position and what powers the bureau should have.

Sources

Bloomberg

Reuters

Los Angeles Times

New York Times

Just because there are new rules for how banks raise interest rates on credit cards doesn't mean Bank of America and others won't still do so. Photo: MoneyBlogNewz/Flickr.com/CC-BY

Just because there are new rules for how banks can raise credit card interest rates does not mean banks will not raise them. Bank of America, for instance, has been reported as raising interest rates to 30 percent for missing a single payment. The increased regulation is making some differences, but may not be as effective as hoped.

CARD Act causes default interest rates to increase

The Credit Card Accountability Responsibility and Disclosure Act of 2009 had a noble aim, which was to make the way credit card companies dealt with their customers and the interest rates on the cards issued to them clearer. One practice in particular was that of default rates, according to Daily Finance. When a customer defaults on their credit card, the interest rate assessed on past and future balances is raised, even if payment is late by a day. In 2009, default rates averaged around 25 percent, but are currently averaging closer to 30 percent. Bank of America is already raising default rates to 29.99 percent on the future balances of customers who are late on payments.

Card issuers have been compliant

Default rates can no longer be charged on past balances unless the account is 60 days in default or more, and banks are complying with laws. However, that is small consolation to card carriers who rely on credit cards to help them cover unexpected expenses. Credit cards are a method for people who don’t have or want to use cash to avoid having to miss payments or resort to other types of short term loans in a pinch, but a 30 percent interest rate makes for a slim margin of error. One missed payment and a car holder won’t be able to afford to rely on their card as a source of credit anymore, which is a common reason for people turning to other lending options such as car title and payday loans. The Consumer Financial Protection Bureau is supposed to begin regulating consumer credit products in a few months, according to CNN, but legislative bickering over the agency may gut it before it opens its doors.

Overdraft fees continue

People are still paying overdraft fees and buying overdraft protection despite the programs having been a cause of customer dissatisfaction, according to USA Today. It is estimated that banks and credit unions will collect nearly $38.5 billion in overdraft fee revenue for 2011. Overdraft fees average about $35 per occurrence when a customer is enrolled in overdraft protection, which not every bank customer wants to. Simply having one’s debit card declined costs nothing, and a transfer of funds from savings to checking in case of an overdraft costs far less than using a line of credit related to overdraft protection.

Sources

Daily Finance

CNN

USA Today

Bank of America Corp. and other large banks may have colluded to manipulate interest rates in their favor, allege the U.S. Justice Department and SEC. (Photo Credit: CC BY/MoneyBlogNewz/Flickr)

The Wall Street Journal reports that the U.S. Justice Department and Securities and Exchange Commission are examining whether a group of the world’s largest banks – led by Bank of America Corp, Citigroup Inc. and UBS – colluded to manipulate the London Interbank Offered Rate of interest (LIBOR) on trillions of dollars in loans and derivatives before and during the global financial crisis. LIBOR represents the rate at which banks borrow funds from each other. It is the world’s most widely used benchmark interest rate and is applied to everything from adjustable rate mortgages (ARMs) to corporate bonds and car loans.

LIBOR collusion investigation ongoing for past year

Law enforcement officials have been investigating whether banks have intentionally been understating their own borrowing costs to benefit a secret global banking cartel. It is suspected that such LIBOR interest rate manipulation occurred in excess between 2006 and 2008. If banks that were secretly struggling with bad debt and liquidity had reported borrowing at higher interest rates then peers, the plight would have been revealed to the public.

Currently, the LIBOR collusion case is being handled by antitrust and anti-fraud prosecutors, according to insiders close to the situation. Investigators are searching for signs of collusion like price fixing and bid rigging. Legal experts note that corporate collusion cases are difficult to prove without email evidence or bank insider testimony.

James Rill, the former assistant attorney general of the Justice Department’s Antitrust Division, told the WSJ that the prosecution will ideally need the assistance of at least two witnesses or hard evidence to make collusion charges stick.

‘Remarkably similar costs’

In 2008, a study conducted by the WSJ found that bank borrowing costs remained “remarkably similar,” despite the fact that each bank faced different kinds of financial trouble. In the first quarter of that year, the three-month borrowing rates for 16 banks remained within a 0.06 percentage-point range, compared to the average LIBOR of 3.18 percent.

At the time, economists at the Bank for International Settlements questioned whether LIBOR was being manipulated. The economists noted that if enough banks colluded, the impact upon LIBOR would be significant.

Class action suits waiting in the wings

In the event that the Justice Department and SEC can prove LIBOR collusion in the antitrust case, the banking consortium would likely be exposed to numerous class-action lawsuits by private plaintiffs harmed by interest rate manipulation. If successful in their suits, plaintiffs would be awarded triple the normal amount of damages, said former Justice Department antitrust lawyer Michael Volkov.

Sources

Bankrate.com

Investopedia

Wall Street Journal

Wikipedia

A LIBOR primer

14 financial institutions have been ordered to pay back any homeowners that were wrongfully foreclosed upon in the robosigning scandal. Photo Credit: respres/Flickr/CC-BY

Federal authorities have ordered more than a dozen large financial institutions to compensate homeowners who were victims of fraudulent foreclosures. The number of homes that were foreclosed because of robosigning have not been totaled up, and the owners of those improperly foreclosed homes will be paid for their anguish.

Largest banks in the nation to pay the price of incompetence

Federal regulators recently reached a settlement with the financial institutions involved in the robosigning scandal, in which foreclosure proceedings were improperly started against homeowners because bank officers could not be bothered to do their due diligence on the paperwork regarding the state of the homeowners’ personal loans. Part of the settlement agreement, according to Reuters, is that any homeowners who were wrongly foreclosed on have to be repaid by the bank that did it. There were 14 companies in all, according to USA Today, including lending companies Ally Financial, Aurora Bank, EverBank, HSBC, Sovereign Bank, SunTrust Banks, MetLife Bank, OneWest Bank, PNC, U.S. Bank, Wells Fargo, Bank of America, JPMorgan Chase, Citigroup and subsidiary Citibank. Loan servicing companies MERSCORP and Lender Processing Services have also been ordered to pay back improper foreclosures. Affected homeowners will likely be contacted by these institutions in the near future to make arrangements.

Total fallout to be determined

It isn’t known yet how many people will be recompensed or how much in fines lenders will have to pay. Some government officials have been recommending up to $20 billion in fines be levied against the financial institutions involved. To further add to the headaches of these institutions, this is only from the settlement with the Federal Reserve, the Office of Thrift Supervision and the Office of the Comptroller of the Currency. Other settlements with other federal agencies are still pending as well as every state attorney general in the nation.

Costs of mortgages to increase

Banking and real estate insiders are insisting that the new legislation and increased regulatory scrutiny will increase the costs of lending a mortgage to a prospective homeowner. New Federal Reserve rules on mortgage officer compensation, according to MarketWatch, may cut into commissions for loan officers. Mortgage brokers and loan officers at lending institutions cannot receive a commission based on the interest rate at which a mortgage is lent at any longer, which analysts predict will eat into profits. The Center for Responsible Lending, a consumer advocacy group that has endorsed reform of financial products from mortgages to payday loans, insists that costs to consumers will not go up, but decreasing revenues are usually passed to consumers in the form of increased costs.

Sources

Reuters

USA Today

MarketWatch

The CEO of Chase disclosed that the federal probe into the robosigning scandal reached a settlement. Image from Wikimedia Commons.

A settlement is soon to be announced regarding the robosigning foreclosure controversy. Some of the nation’s largest mortgage lenders rubber-stamped foreclosure documents without looking at them and may have foreclosed on some people who didn’t deserve it. A legal probe into foreclosure practices has reportedly reached a settlement with those lenders.

JPMorgan exec discloses deal with some federal agencies

Chief Executive Officer of JPMorgan Chase Jamie Dimon recently disclosed that the government probe into the robosigning controversy had come to an agreement with the mortgage lenders being investigated, according to Reuters. Dimon confirmed that no fines had been levied yet, but they are likely to come. The nation’s largest mortgage lenders and servicers were the subject of a sweeping investigation by nearly a dozen federal agencies and the attorney general of every state in the union. The agreement is not complete; it is only the settlement between the financial institutions involved and the Federal Reserve, the Office of the Comptroller of the Currency and the Office of Thrift Supervision. A settlement with all 50 state attorneys general has not been reached.

State settlements to come

The controversy stemmed from the discovery that a lot of foreclosure proceedings started when paperwork to begin foreclosures was approved in a robotic fashion, or “robo-signed,” without proper review. The resolution of the robosigning foreclosure debacle is important, as foreclosure practices may change. JPMorgan, for instance, expects to hire at least 3,000 more employees to ensure compliance with the settlement agreement, according to Bloomberg. In other words, there will be an increased amount of regulation in the mortgage industry when it comes to foreclosures, which means it will cost the lenders in the mortgage industry more to lend and service a loan. Those costs will be passed on to the consumer at some point, likely in the form of requiring more money up front to get a loan. There is also a backlog of foreclosures on the books at these banks, as they have become more skittish about foreclosing on borrowers who are delinquent in paying their mortgage.

Mortgage modification failed participants

One failure of the Obama administration and the various stimulus programs was the various mortgage modification programs that were made available through the federal government. People who were behind on their mortgages or facing foreclosure could apply for a modification. The distressed homeowner’s lender would receive an incentive payment from the government if it modified the borrowers’ mortgage on a trial basis. However, according to USA Today, not many people were helped. The goal was to keep 3 million to 4 million people in their homes; instead only about 630,000 people had their mortgages permanently modified.

Sources

Reuters

Bloomberg

USA Today

By green-lighting more shareholder dividends, the Fed has allowed banks to increase leverage, which could lead to needing another bailout. Image: CC Flickr/TheTruthAbout

Bank of America quarterly dividends will stay stuck at only 1 cent for the rest of the year on order from the Federal Reserve Wednesday. However, last week after the Fed conducted stress tests on the biggest U.S. lenders it allowed many major banks other than Bank of America to increase shareholder dividends. Many financial analysts are concerned that the Fed’s decision to allow any bank to increase shareholder dividends poses an undue risk to economic recovery.

Fed throttles Bank of America dividends

In January Bank of America told the Federal Reserve it wanted to initiate an increase in shareholder dividends in the second half of 2011. The bank was expected to raise its quarterly dividend by up to 8 cents, about 20 percent of its anticipated earnings this year. According to analysts, the Fed forbid B of A from doing so because of the bank’s exposure in the housing market after buying out Countrywide in 2008, a decision that cost it $2.24 billion last year. Investor groups have also been pressuring B of A to buy back billions in bad mortgage securities that the bank foisted on them before the meltdown. After the green light from the Fed, JPMorgan Chase, Wells Fargo and U.S. Bancorp quickly announced dividend hikes. Bank of America said it planned to submit a revised dividend proposal to the Fed by the end of June.

Why banks want to increase shareholder dividends

Wall Street banks say without increasing dividends they will have a hard time raising more equity in the future, which they say will hold back economic growth. By paying shareholder dividends, banks attract investors but lose equity. Bankers disdain equity and love leverage. While a company like Google is funded almost entirely by equity, the average bank lives on other people’s money, funding more than 95 percent of investments with debt. Banks avoid equity because their executives and shareholders make big money on leverage as long as the financial services sector is healthy. Banks also avoid equity because the more equity they hold, the more liable they are for the risks they take. If things go sour, they have to reduce the risk of default at their own expense, rather than count on taxpayers to bail them out.

Fed decision risks another bailout

During the financial crisis, highly leveraged banks caused alarm at the Fed. Some analysts believe the Fed needs to allow the economy to get stronger before allowing increases in shareholder dividends. Simon Johnson of the New York Times compared a highly leveraged bank to buying a house with a minuscule down payment on a mortgage for 98 percent of the purchase price. If home prices rise, the risk pays off. If they drop, the borrower is quickly underwater and creditors get the shaft. The difference, however, between highly leveraged banks and highly leveraged homebuyers is that the banks have learned they are too big to fail. When a highly leveraged bank fails, a government bailout rescues its executives, shareholders and creditors, and U.S. taxpayers get the shaft.

Sources

New York Times

Business Insider

CNNMoney.com

Bank of America has unveiled a pilot program that grants customers greater choice between checking account types, and associated bank fees. Photo Credit: MoneyBlogNewz/Flickr/CC-BY

Bank of America has unveiled a new pilot program that gives members of the bank more choices regarding their checking accounts. The bank is offering new customers in select areas choices between checking accounts with varying structures of bank fees. Bank of America and other large national banks have been steadily raising fees.

New pilot program lets customers choose banking fees

A new pilot program by Bank of America allows customers to choose from several different checking account plans; this allows greater choice regarding which account fees they prefer to potentially face, according to ABC. The largest national banks have come under criticism for charging excessive banking fees, and now Bank of America, JP Morgan Chase, Wells Fargo and others have rolled out new programs for checking accounts to make fees more transparent. The new B of A checking account programs are being offered in Georgia, Arizona and Massachusetts.

Monthly fees vary by account type

Bank of America is offering five checking account options, and fees range from $6 to $25 per month. The account types include:

• Essentials: Simple checking account with a debit card. The monthly account fee is $8.95, but the fee is waived if a customer receives monthly direct deposits or maintains a minimum account balance of $1,500.
• eBanking: Also simple checking. However, customers can waive most fees altogether by banking entirely online or through an ATM and electing to receive electronic statements instead of paper. However, overdraft, non-sufficient funds and ATM fees will still likely apply.

Account options with greater amenities are geared toward wealthier account holders.

• Enhanced: Account fees are waived if customer has a minimum balance of $2,000 in one account or $5,000 across linked accounts. The Enhanced account offers two linked checking and two savings or money market accounts. Enhanced account holders can also have fees waived with monthly use of linked credit cards.
• Premium: Fees are waived with a minimum balance of $20,000 across linked accounts, certain Merill Lynch investment accounts or a mortgage through Bank of America. This account offers services such as cashier’s checks and money orders for free.
• Platinum Privileges: Customers must have a minimum account balance of $50,000 in order to be eligible for these perks: Personalized customer service, a Privileges credit card, special rates on mortgages and money market accounts.

Bank fees on the rise

As the federal government has increased regulatory pressure on banks to curtail deceptive fee practices, account fees have been steadily rising at the nation’s largest banks. B of A, Chase and Wells Fargo are trying to make up for revenues lost when the Dodd-Frank Act curtailed fee practices that weren’t made clear to customers, e.g. enrolling checking account holders in costly overdraft protection programs without notifying them.

Source

ABC

Credit card issuers, such as Bank of America, have been affected by new laws regarding credit cards. Image: MoneyBlogNewz/Flickr.com/CC-BY

New regulations for credit cards on how interest rates and fees can be assessed are working. However, some loan lenders are lamenting the new rules that require greater disclosure when changing terms with customers. Outlawing guerrilla-style fee and interest raises has led Bank of America and other companies to lose value from credit card units.

Bank of America realizes loss from credit card unit

The largest loan lender in the nation, Bank of America, recently announced that it would be adjusting previously filed financial statements regarding the banks’ credit card unit, according to Bloomberg. B of A announced that it was adjusting a write down of FIA Card services, its credit card unit, for late 2009 from $10.4 billion to $20.3 billion, meaning the credit card unit is worth $20.3 billion less thank it was in 2008. In other words, the company adjusted previous filings to reflect a greater loss of value than previously thought. The write down is not a true cash loss, but an adjustment of the “goodwill” value, or the value of an asset above market value, due to the prestige of the holder of the asset. The bank cited regulatory conditions and “deteriorating credit quality” for FIA Card Services being worth $10 billion less than estimated in 2009.

CARD Act cited for losses

Some credit card loan lenders, such as Bank of America, are claiming that they are being hampered by new regulations, specifically the CARD Act, or Credit Card Accountability Responsibility and Disclosure Act. It is posited that the act means less access to advance cash for further lending, though this means that the law is working. Since the CARD Act was enacted, fewer people have been hit with late fees and stung with sudden interest rate raises, according to CNN.

New card law a smashing success

The CARD Act has yielded some great results. Since the law was passed, studies show that about 2 percent of card holders had interest rates raised, compared to 15 percent before the CARD Act was passed. Late fees, which accounted for $901 million in instant cash for card issuers in January 2010 — before the Act took effect in February 2010 — had dropped to $427 million by November 2010. That means companies from Scottsdale to Birmingham and all over the U.S. that look to seemingly surreptitious practices for revenue are having a harder time, which is what the CARD Act is supposed to do.

Sources

Bloomberg

CNN

Bank of America is one of two banks gearing up to fight a clause saying it has to buy back mortgages. Image: Flickr / MoneyBlogNewz / CC-BY

The repackaging of mortgages into securities, for many investors, ended up being a bad deal. The bad deal, however, could end up being banks’ responsibility. A clause written into many of the securities could mean banks have to spend $60 billion to re-buy mortgages gone bad.

Security clauses for mortgage securities

When banks packaged, sold and re-packaged mortgage securities for sale, they made billions of dollars. Many of these mortgage securities were more than just bad credit loans, however. The securities also contained a clause that said if the loans go south, the bank would re-purchase the loans. During the height of the mortgage bubble, this seemed like a minor issue. Now that billions of homes are in foreclosure, that clause is forcing buybacks, and banks are putting up a fight.

$60 billion liability

The buyback clause on mortgage-backed securities has been triggered by dropping credit ratings and values. Credit ratings agencies estimate that the nation’s six largest banks face about $60 billion worth of buyback liability. Half of that liability is owed to U.S. Government-backed Freddie Mac and Frannie Mae. In January, Bank of America paid Frannie and Freddie $2.5 billion to buy back a portion of those mortgages. These mortgages are spread all over the country, with a high number in high-foreclosure states such as Nevada.

Years of buybacks in the works

JPMorgan Chase and Bank of America are the two banks with the “highest exposure” to buybacks. There are three groups of businesses seeking to sue banks that are not buying back mortgages — insurers, mortgage finance companies and private investors. Even if the banks do repurchase some of the loans, as dictated in the terms of the packaged securities, they likely will not buy them all back. In the end, that means that banks will have years of possible lawsuits and bad loans on the books, all while the investors are stuck with foreclosed homes that their contracts say they should not have.

Source

NY Times Dealbook

Bank of America is shuttering the reverse mortgage portion of its business. Image: Flickr / MoneyBlogNewz / CC-BY

Tuesday morning, Feb. 8, Bank of America announced it will no longer write reverse mortgages. The reverse mortgage business has dropped off significantly in the last year. A rising number of reverse mortgages are also ending up in technical default.

Bank of America and reverse mortgages

Bank of America first started offering reverse mortgages in 2006. In 2007, Bank of America purchased Reverse Mortgage America. In 2008, Bank of America purchased Countrywide Financial Corporation and took over its mortgages and reverse mortgage operations in Reno, Nevada, and around the nation. As of early 2011, Bank of America will close down all reverse mortgage operations and move the 600 employees to other divisions within the bank. All those who hold or are currently applying for Bank of America reverse mortgages will still be serviced by the bank.

A reduction in the reverse mortgage business

Reverse mortgages — in which homeowners sell their home back to the bank over time — have dropped in popularity. The number of new reverse mortgages written dropped by more than a third in 2009, and dropped again in 2010. The number of homeowners who are technically in default on their reverse mortgages is also increasing. A reverse mortgage default is more difficult to parse, because going into “default” means not paying taxes on the property or keeping it maintained. Many seniors are facing the choice of taking out no fax payday loans to keep their home maintained or lose their main source of secondary income.

The benefit of reverse mortgages

Reverse mortgages are currently losing popularity. Many senior citizens are outliving their reverse mortgages, or defaulting from lack of maintenance on the home. In some situations, however, a reverse mortgage can help individuals pull equity out of their homes without having to try to sell the home. In short, reverse mortgages may be helpful at times, but they are often extended beyond the intended use of the product.

Sources

Miami Herald
Nasdaq

If the dirt Wikileaks has on Bank of America is released, prayers won't help a bit. (Photo Credit: CC BY-SA/Jonathan McIntosh/Wikipedia)

Wikileaks founder Julian Assange recently told British New Statesman magazine that if he is imprisoned in Guantanamo or killed – or if a serious attempt is made to shut down Wikileaks – a digital “insurance policy” that comprises 1.5 gigabytes of encrypted, incriminating data on Rupert Murdoch, News Corp. and two major financial institutions will be unlocked for the world to see. Bank of America, which has been confirmed as one of the two banks in question, is currently in full damage control planning mode, reports PRWatch. It is believed that Wikileaks plans to expose B of A’s reportedly unethical conduct relating to toxic mortgages, illegal foreclosures and the use of bailout money for employee bonuses.

Assange may prove B of A execs knew they peddled toxic mortgages

Private investors and large-scale lenders like Fannie Mae and Freddie Mac are currently suing Bank of America in order to force the bank to buy back billions of dollars in toxic mortgage-backed securities. While Bank of America did stop issuing its own subprime mortgage loans in 2001, PRWatch indicates that the bank still underwrote $239 million in securities back by subprime loans as late as Sept. 2009.

It is suspected that in the encrypted insurance file, Julian Assange and thousands of other individuals who have a copy of the file (minus the decryption key) are holding copies of e-mails that prove Bank of America executives knew they were passing off toxic mortgages to investors. If this is true, Bank of America will likely need much more than the $4.4 billion currently set aside to deal with its slate of toxic mortgage lawsuits.

Bank of America’s alleged illegal foreclosures and bonuses

Illegal foreclosures – particularly of the wrong homes – have been another thorn in Bank of America’s side lately, although the bank has attempted to shift blame to the contractors it uses to perform the home seizures. If Assange can prove that Bank of America signed off on thousands of foreclosure documents without proper review, he will prove that Bank of America broke the law.

Add to this the list of claims Bank of America still faces after the Countrywide subprime debacle, and the corporate bonuses taken from bailout money and it appears Bank of America could be in serious trouble.

Sources

New Statesman

PRWatch

‘An ecosystem of corruption’

Major banks are starting to demand more cash be advanced to them simply for having an account with them. Photo Credit: MoneyBlogNews/Flickr/CC-BY

Major banks are all starting to require some cash advanced by checking account holders just for the pleasure of banking with the company. Fees for checking accounts are being raised at most major banks, but there are ways of getting around them. People using their own money are having to pay more for it.

Banks want cash advanced just for banking with them

Part of the marketability of the nation’s largest banks is that they project an image of more security. Banks know this, and now they want some cash advanced to them just for the pleasure of banking with them. The largest national banks are raising fees on checking accounts, according to CNN, and the changes are starting soon. JPMorgan Chase has announced that new checking accounts will automatically be opened under the new Total Checking program, which has a base monthly maintenance fee of $12 a month. Bank of America is instituting fees on checking accounts, from $8.95 to $25 a month, depending on the plan. It appears Corporate America wants people to pay to use their own pay day cash.

Free checking not disappearing

It may seem there aren’t any banks that offer free checking anymore, but nothing could be further from the truth. The majority of credit unions and community banks offer free checking, and because credit unions are nonprofit organizations, an account holder is essentially injecting instant cash into their own community. Credit unions and community banks are in nearly every city, in every state, from Alabama to Arizona, and all points in between.

The same folks who needed bailouts

These are the same people who also received billions in the bailouts. Not only do they want more of our earnings, they want our tax dollars too. Not that these companies are all bad, but it certainly means that more people are going to be excluded.

Source

CNN

Bank of America has just set aside some cash to compensate Freddie and Fannie for bad guaranteed loans the bank is responsible for. Image: MoneyBlogNewz/Flickr/CC-BY

Bank of America has reached an agreement to compensate Freddie and Fannie for selling them toxic guaranteed loans. The largest bank in the nation will pay more than $3 billion to the troubled mortgage houses. B of A is expected to take a loss on the deal.

Bank of America to make amends for bad guaranteed loans

Bank of America has finalized an agreement to compensate Freddie Mac and Fannie Mae for toxic mortgage assets sold to the two mortgage houses, according to MSN. Not all of the bad guaranteed loans were sold to Freddie or Fannie by Bank of America, however. The settlement is largely over loans that were originated by Countrywide, which was purchased by and merged into Bank of America in 2008. Prior to that, Countrywide had been one of the largest loan lenders in the nation for mortgages. Of all people who bought a home from New York to San Diego and all points in between before the 2008 mortgage crisis, about one in five got their home loans from Countrywide. Bank of America took over responsibility for all Countrywide assets, including settling with Fannie and Freddie.

Expected loss for largest national bank

It is expected that Bank of America, the largest bank in the nation, will file a $2 billion loss for the fourth quarter of 2010. The bank has set aside more than $3 billion for Freddie and Fannie for Countrywide mortgages and others sold to the mortgage houses. B of A has already bought more than $11 billion in bad bank loans from the two houses, with around $2.7 billion left. Still, Bank of America probably won’t need a cash advance to see the agreement to the end.

Mortgage houses still owed

Numerous large banks still owe Freddie Mac and Fannie Mae some considerable sums, as toxic mortgage assets sold to the two have to be either bought back or compensated for. The government still runs the two companies.

Source

MSN

If Bank of America is the next target for WikiLeaks, evidence of unethical finance on Wall Street is old news. Image: CC MoneyBlogNewz/Flickr

In the latest WikiLeaks news, Bank of America is rumored to be the next target. WikiLeaks founder Julian Assange has been stoking high drama by threatening the release of files from a big bank without saying which one. Analysts wonder if anything new will be revealed and one said it’s financial regulators, not bank executives, who could be embarrassed by the next WikiLeaks release.

WikiLeaks and Bank of America

WikiLeaks and Bank of America were linked as far back as October 2009 when Assange told Computerworld he had incriminating files stolen from a Bank of America executive’s hard drive. Recently Assange has said WikiLeaks would release secret files that would expose unethical behavior at a major U.S. bank in early 2011. The fact that Bank of America announced on Dec. 18 that it will no longer process payments to WikiLeaks added fuel to the fire of speculation that B of A would be the subject of the next WikiLeaks media feeding frenzy.

B of A not the only ones worried about WikiLeaks

Investors have been worried about the WikiLeaks/Bank of America rumors. Assange told the London Times Monday that his next leak would make bank executives resign. But Andrew Ross Sorkin of the New York Times points out that it’s financial regulators, not Bank of America executives, who have the most to lose. Revelations of financial industry malfeasance are nothing new these days. What would be news is the fact that if such bald-faced evidence of unethical finance, why didn’t financial regulators uncover it, and if they did, why didn’t they do anything about it?

The Feds’ WikiLeaks conundrum

The Feds have spent millions investigating Wall Street with nothing to show for that investment but bailouts. The dilemma for the U.S. government in the WikiLeaks/Bank of America drama is that the Justice Department is currently exploring ways to charge Assange with espionage. Can Attorney General Eric Holder prosecute the WikiLeaks founder with one hand and use evidence released by his organization to go after bank executives with the other? It will look bad any which way. Meantime, WikiLeaks will reap another bountiful harvest of publicity and Assange will continue to enjoy basking in the spotlight.

Sources

New York Times

Forbes

CNBC

Bank of America is under fire for how few foreclosures it has modified or stopped. Image: Flickr / moneyblognewz / CC-BY

Though Congress and state officials are investigating Bank of America foreclosures, Nevada has taken an extra step. The Nevada Attorney General has filed suit against BoA for “deceptive practices.” This lawsuit alleges that the short term loans BoA promised as mortgage modifications simply were not offered.

Nevada loan modifications

The Nevada Attorney General has filed a federal lawsuit against Bank of America. The lawsuit alleges that Bank of America made “false assurances” about the loan modifications they were going to offer. The suit also alleges that short-term loan modification requests were rejected for “inaccurate and deceptive reasons.” In a statement about her lawsuit, Nevada Attorney General Catherine Masto issued a statement that said Bank of America has displayed “callous disregard for providing timely, correct information to people in their time of need.”

The effect of Bank of America on Nevada

Nevada is one of the states that has been hardest hit by the foreclosure crisis. In 2008, Bank of America and Countrywide Financial Corp were ordered by the court to offer good-faith efforts to modify loans. Nevada claims that Bank of America violated that court order by continuing to make a mess of pending foreclosures and modifications in the state. Nevada reports less than 30 percent success with Bank of America Home Affordable Modification Program, while other banks are showing 60 to 89 percent success.

The response of Bank of America

On the same day that Nevada filed suit against Bank of America, Arizona also filed a similar suit. Bank of America has responded to both lawsuits by saying they believe there are “better” ways to address the foreclosure problems. “We share Attorney General Masto’s goal of helping Nevada homeowners. We are disappointed that the suit was filed at this time, however,” Bank of America said. The bank has also said they believe the problems are best addressed in the 50-state negotiations they are currently undertaking. Given the slow response Bank of America has shown in modifying loans or providing short term lending for homeowners in trouble, it is no surprise that Nevada officials have trouble believing them.

Sources:

LA Times
Mother Jones

Bank of America has cut off WikiLeaks; the number of financial organizations to stop payments to WikiLeaks is growing. Image from WikiMedia Commons.

Bank of America cut off WikiLeaks from receiving any payments from the organization. B of A has joined a host of other companies to do likewise. Some believe that finance companies are doing so ahead of a WikiLeaks release of bank documents in 2011.

WikiLeaks cut off from receiving payment from Bank of America

A host of financial companies have cut off WikiLeaks from receiving payments from those respective organizations, and Bank of America has joined the WikiLeaks denial of cash bandwagon. Just a few days ago, Bank of America announced that it had suspended any payments that were going to the WikiLeaks organization, according to the New York Times, as the company did not handle itself in a manner that B of A felt was in accordance with its corporate values. Other companies have been doing so as well. PayPal, MasterCard and Visa Europe have all refused to handle or process any payments being sent to WikiLeaks over the last couple of weeks, which resulted in directed denial of service, or DDOS attacks on those respective websites.

Backlash could be the motive ahead of bank document release

There is some suspicion that Bank of America cutting off WikiLeaks, and other organizations, has everything to do with a preventative backlash. In an interview given weeks ago with Forbes, Julian Assange, the head of WikiLeaks, announced that he had a lot of information that could “take down” a major American bank. He also said that WikiLeaks had documents from Bank of America specifically, that had come from a hard drive possessed by a former executive.

Assange out on bail

Julian Assange is currently out on bail in England. A lengthy court engagement granted him limited release with strict conditions, while the decision over extradition of Assange is weighed in court. He faces sexual assault charges in Sweden, though it isn’t known how solid the case is.

Sources

New York Times

Bank of America could conceivably be paying for the mortgage loan modification mess for decades. (Photo Credit: CC BY-SA/Michael Gray/Flickr)

Waiting for mortgage loan modifications that banks fraudulently promised has thrown thousands of American families into foreclosure. Bank of America, perhaps the nation’s worst offender, has been a target of the Federal Reserve because of mortgage bonds for a while, and now the State of Arizona is stepping in on behalf of its homeowners. The Associated Press reports that state Attorney General Terry Goddard has filed a civil lawsuit against Bank of America for what he claims is multiple violations of consumer fraud law by “misleading consumers” who are seeking mortgage loan modification.

B of A lied to mortgage loan modification customers

Reports indicate that despite a string of assurances that the mortgage loan modification would go off without a hitch – a string of assurances that would last many months – Bank of America still foreclosed on hundreds of Arizona homes. Throughout the waiting period, many homeowners whose mortgages were underwater continued to make payments, only to find later that B of A had lied and would not grant a mortgage loan modification. Foreclosure was the next nasty step.

“Those people could have used that money for something else,” Arizona Attorney General Terry Goddard told the AP. “They were deceived into continuing to make mortgage payments when they had no hope of saving their homes.”

Consumer complaints spurred Goddard to action

After receiving a massive number of complaints from Arizona residents regarding Bank of America’s mortgage loan modification practices, Attorney General Goddard took action more than a year ago. There had been talk of a settlement dating back to April, but those talks dissolved yesterday. Today, the State of Arizona has filed suit against Bank of America in Maricopa County Superior Court. According to Goddard, the State of Nevada is expected to file a similar lawsuit.

Sources

Associated Press

A tale of B of A mortgage loan modification woe

Loan lenders are going to freeze foreclosure activity for the holidays, as is customary. Image: Brendel/WikiMedia Commons/CC-BY

Every year, most home loan lenders halt foreclosures through the holidays. This year, most mortgage lenders are halting foreclosure activity for Christmas, as it is customary to do so. It isn’t unusual, but a foreclosure freeze was already in effect for some lenders anyway.

Loan lenders customarily halt foreclosures

Typically, mortgage loan lenders halt all foreclosure activity from late December until after New Year’s Day, according to CNN. This year will be no exception. Freddie Mac and Fannie Mae have a freeze on foreclosing on any outstanding installment loans that either company lent or backed. Freddie and Fannie are still a long way from emerging from conservatorship, as both companies are still under the direct control of the Treasury, but auctioning a few homes would not help the troubled mortgage houses. Both are still suffering from the weight of toxic mortgages, regardless of how many emergency loans either company has received from the government.

Large lenders freezing foreclosures as well

The nation’s largest loan companies are freezing foreclosures for the holiday as well, as is the custom. JPMorgan Chase, Bank of America and Wells Fargo are all halting evictions from foreclosed properties where the people who were borrowing money lapsed on payments. However, Bank of America and JPMorgan Chase are both embroiled in the “robo-signing” controversy and cannot necessarily evict anyone to begin with. Both companies are accused of automatically signing off on foreclosures without having done the due diligence as to whether the action was legal.

Much needed reprieve

Currently, about 100,000 people lose their homes to foreclosure per month. Foreclosures have been a scourge of the real estate industry, but the bright side, if there is one, is that the rate hasn’t been accelerating lately. However, the key to fixing the real estate market is for unemployment to further decrease.

Sources

CNN

The Fed is leading a group of investors trying to force Bank of America to buy back $47 billion in bad mortgage bonds. Image: CC Shannon Clark/Flickr

The foreclosure crisis could be coming home to roost on the banks that caused the housing crisis. The Federal Reserve Bank of New York joined a group of the largest bond investors in the U.S. Wednesday to demand that Bank of America buy back bad mortgage loans packaged into securities. Other mortgage bond investors are expected to follow suit, along with lawsuits that could lead to big losses for big banks.

Fed improves odds for jilted investors

Investors who took a bath in the housing crisis want to recoup losses on mortgage bonds from the banks that sold them. Bloomberg reports that the fight over who will ultimately take the hit got more interesting Wednesday when the Federal Reserve Bank of New York threw its weight behind a bid to force Bank of America to buy back $47 billion in bad mortgage debt packaged and sold by its subsidiary Countrywide Financial Corp. The Fed joined a group including Pacific Investment Management Co., BlackRock Inc. and Freddie Mac. An investment analyst told Bloomberg that the Fed’s involvement increases the odds that the group may prevail.

B of A seeks to evade responsibility

Bank of America said it refuses to be held responsible for the losses. Reuters reports that in a conference call with analysts, Bank of America Chief Executive Brian Moynihan said investors can’t justify the claim that his bank sold them bad mortgages. He compared it to people saying they bought a Chevy but they want a Mercedes in return. A representative for the group of investors told Reuters that it was a case of “buying a Vega and getting a Vega.”

Bank bailout 2.0

With the largest bond investors in the U.S. trying to force the largest mortgage lender in the U.S. to give them their money back, “expect a tidal wave to begin,” said Daniel Indiviglio at The Atlantic. Banks, even though they’re sitting on tens of billions of dollars in cash, will lose big if investors are successful. Banks may lobby Congress to pass a law that lets them off the hook. That just might happen because if the banks are forced to face the consequences of their actions, the financial industry could melt down once again.

Sources

Bloomberg

Reuters

The Atlantic