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DealBook: Bank of America to Pay $10 Billion on Loan Claims

January 7, 2013 by Leave a Comment

8:44 a.m. | Updated

Bank of America agreed on Monday to pay more than $10 billion to Fannie Mae to settle claims over troubled mortgages that soured during the housing crash, mostly loans issued by the bank’s Countrywide Financial subsidiary.

Under the terms of the pact, Bank of America will pay Fannie Mae $3.6 billion, and will also spend $6.75 billion to buy back mortgages from the housing finance giant at a discount to their original value.

The settlement will resolve all of the lender’s disputes with Fannie Mae, removing a major impediment to Bank of America’s rehabilitation. The bank had settled its fight with Freddie Mac, the other government-owned mortgage giant, in 2011.

Both Fannie and Freddie, which have posted billions of dollars in losses in recent years, have argued that Countrywide misrepresented the quality of home loans that it sold to the two entities at the height of the mortgage bubble. Bank of America assumed those troubles when it bought Countrywide in 2008.

By removing part of the bank’s mortgage albatross, the move on Monday is a continued retreat from home lending by Bank of America, even as rivals including JPMorgan Chase and Wells Fargo compete for the profitable refinance business that has boomed with interest rates persistently low.

Bank of America also agreed to sell the servicing rights on about $306 billion worth of home loans to other firms. In separate statements, Nationstar Mortgage Holdings and the Newcastle Investment Corporation announced they were buying the rights. Those servicing costs, which were roughly $3.4 billion in the third quarter, have weighed on the bank’s profits, especially as borrowers fall behind on their bills.

Brian T. Moynihan, the bank’s chief executive, said in November that he intended to sell off about two million loans the bank currently serviced.

“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,” Mr. Moynihan said in a statement on Monday.

Bank of America said it expected the settlement to hurt its fourth-quarter earnings by $2.5 billion because of costs tied to foreclosure reviews and litigation. The firm also expects to record a $700 million charge, an accounting move known as a debt-valuation adjustment, related to an improvement in the prices of its bonds.

The deal on Monday helps the bank move away from its troubled mortgage business. Still, the bank’s attempts to resolve other costly mortgage litigation have so far been stymied. Looking to appease investors that sued the bank for losses when mortgages packaged into securities imploded during the financial crisis, the bank agreed to pay $8.5 billion in June 2011. But the settlement, which would help mollify investors including the Federal Reserve Bank of New York and Pimco, has been stalled.

Further thwarting Bank of America’s retreat from the mortgage business, federal prosecutors sued the bank in October, accusing it of churning through loans so quickly that quality controls were virtually forgotten. The Justice Department sued the bank under a law that could mean Bank of America could pay well more than $1 billion to settle.

Bank of America is among 14 banks said to be negotiating with federal regulators to resolve such claims related to foreclosure abuses.

Ben Protess contributed reporting.

Article source: http://dealbook.nytimes.com/2013/01/07/bank-of-america-to-pay-10-billion-in-settlement-with-fannie-mae/?partner=rss&emc=rss

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Russian Aide Suggests W.T.O. Issues Can Be Resolved Soon

October 31, 2011 by Leave a Comment

The adviser, Arkady V. Dvorkovich, made the comments after a meeting between Mr. Medvedev and the president of Switzerland. Switzerland has been acting as a mediator in thorny talks with Georgia, which, as a member of the trade organization, has the power to block Russia’s membership bid.

“There are a number of issues that will require clarification,” Mr. Dvorkovich said after the talks. He said the Swiss negotiators would travel to Tbilisi, the Georgian capital, to discuss them.

“We hope that all the issues will be agreed on over the next few hours,” he said, in comments reported by the Interfax news service, adding that none were major problems.

The comments suggest that Russia is seeking some changes to a compromise proposal that Georgia endorsed Thursday. Georgia has sought trade-monitoring missions on its border with Russia, and its negotiators claimed they had softened their original position by agreeing that the monitors would be private contractors, rather than government employees. According to the proposal, put forward by Swiss mediators, the private contractors would be hired by neutral parties, like the European Union.

It is unclear what alterations Russia is seeking in the deal. Russia has long resisted monitoring in a form that would compromise Moscow’s formal recognition of two Georgian enclaves as sovereign nations. Mr. Dvorkovich spoke emphatically on the issue last week, saying of Georgia’s demands that “we cannot meet them, and we will never meet them.”

On Sunday, though, Mr. Dvorkovich said that if Russia’s outstanding concerns were addressed, he saw no “substantial impediment” to approving Russia’s accession documents at a November meeting. Russian membership would be made final at an annual ministerial meeting in December.

President Micheline Calmy-Rey of Switzerland, who met here with Mr. Medvedev on Sunday, will meet with Georgia’s president, Mikheil Saakashvili, on Monday, according to a Georgian official.

Giga Bokeria, secretary of Georgia’s National Security Council, said it was not clear whether Russia was raising significant objections to the proposal or simply seeking to clarify points that have been left vague, like the question of what public entity would oversee the company that will monitor trade on the border.

“It’s just common sense — if they accept the proposal, it’s fine,” he said. “If they are saying they need changes in the current proposal, that might mean no.”

Russia has the largest economy of any country not in the 153-member World Trade Organization, and the World Bank says that by joining, Russia could bolster its annual gross domestic product by as much as 11 percent over the long term. Short-term gains would be smaller, at 3.3 percent, and noncompetitive industries stand to suffer, leading some Russian experts to oppose membership.

Mikhail Remizov, head of the Institute of National Strategy, a research group in Russia, called membership “neither a necessity, nor some sensible benefit.” In conditions of economic crisis, it would limit Russia’s ability to use protectionist policies to support its industries, he said in an interview with the radio station Kommersant FM. By providing a roadblock, he said, Georgia had ultimately served Russia’s interests.

“Russia’s best friends often turn out to be its non-friends,” he said.

Article source: http://www.nytimes.com/2011/10/31/world/europe/russian-aide-hopeful-wto-issues-can-be-resolved-soon.html?partner=rss&emc=rss

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FedEx Sees Global Slowdown, Cuts Profit Outlook

September 22, 2011 by Leave a Comment

The slowdown prompted the world’s second-largest package delivery company to lower its earnings expectations for the fiscal year that ends in May. But while anxiety over the economy created a rout in the stock markets, and its own shares, FedEx isn’t yet ready to predict another recession in the U.S.

“While there’s been considerable speculation that the economy has or will soon enter a recession, this is not our view at present,” FedEx CEO Fred Smith said Thursday on a conference call. FedEx’s larger rival United Parcel Service Inc. said last week that it thinks another recession is unlikely, although it warned of a “bumpy ride” for the global economy.

“Our customers’ hair is not on fire. They’re just saying we’re taking it steady as she goes. It just feels completely different than it did back in ’08,” FedEx Chief Financial Officer Alan Graf said.

Investors weren’t so sanguine. They sent FedEx shares down as low as $64.55, a level not seen in more than two years. In mid-afternoon the shares had fallen 9.6 percent to $65.59. The shares had already lost about a quarter of their value since FedEx last reported earnings in June. UPS shares dropped 4.3 percent to $61.55.

FedEx and UPS are closely watched indicators of broader economic health because they ship so many packages between consumers and businesses every day.

When consumers and businesses are concerned about the strength of the economy, they tend to choose slower shipping options — like switching from overnight express service to slower ground shipping — to save money. It’s the same move many made during the recession.

FedEx executives said lagging consumer sentiment, driven partly by a lack of confidence that officials in Europe and the U.S. will find effective solutions to their countries’ economic challenges, is the biggest impediment to economic growth.

“We’ve got to turn around this sentiment in order to see some growth beyond what we are expecting right now,” Smith said

FedEx now expects to earn between $6.25 and $6.75 per share for fiscal 2012, compared with a previous estimate of $6.35 to $6.85 per share. Analysts expect $6.39 per share, according to FactSet Research.

For the fiscal first quarter that ended in August, FedEx says an increase in deliveries by truck offset a drop-off in shipments by air. Net income rose 22 percent to $464 million or $1.46 per share in the three-month period, compared with $380 million, or $1.20 per share, a year earlier. Revenue rose 11 percent to $10.52 billion.

Analysts expected a profit of $1.45 per share on revenue of $10.32 billion.

Express shipments slowed most notably from China, where growth had been robust. FedEx said the slowdown in that division outpaced its ability to cut costs, which it said it’s doing aggressively to balance demand. As a result, the Express division’s operating income fell 19 percent, even as revenue rose 12 percent. Average daily express volume in the U.S. fell 3 percent. But revenue per package rose 13 percent as packages weighed more on average and FedEx tacked on higher fuel surcharges.

Operating income in FedEx’s ground segment leaped 42 percent to $407 million. Revenue rose 16 percent to $2.28 billion. Average daily package volume grew 5 percent driven by an increase in shipments between businesses and FedEx home delivery service. International priority shipments — the speediest and most expensive shipping option — fell an average of 4 percent per day.

FedEx’s freight segment, which hauls heavier shipments like refrigerators and car parts, posted an operating profit of $42 million compared with a loss of $16 million a year earlier. Revenue rose 6 percent.

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Article source: http://feeds.nytimes.com/click.phdo?i=9aa8b7d0f80f68857912764a09eb7220

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