April 29, 2024

You are here: Home / Archives for wells fargo

Bank of America Settles Claims Stemming From Mortgage Crisis

June 30, 2011 by Leave a Comment

Bank of America announced Wednesday that it would take a whopping $20 billion hit to put the fallout from the subprime bust behind it and satisfy claims from angry investors. But for its peers, the settlements may just be starting.

Heavyweight investors that forced Bank of America to hand over billions to cover the cost of home loans that later defaulted are now setting their sights on companies like JPMorgan Chase, Citigroup and Wells Fargo, raising the prospect of more multibillion-dollar deals.

“Bank of America has charted a path that our clients expect other banks will follow,” said Kathy D. Patrick, the lawyer who represented BlackRock, Pimco, the Federal Reserve Bank of New York and 19 other investors who hold the soured mortgage securities assembled by the Bank of America.

Ms. Patrick’s clients are seeking $8.5 billion from Bank of America — a settlement that needs a judge’s approval and could still face objections from investors seeking a better deal. A date to review the blueprint has been set for Nov. 17 with Justice Barbara R. Kapnick in New York Supreme Court.

All told, analysts say the financial services industry faces potential losses of tens of billions from future claims — real money even by the eye-popping standards of the nation’s biggest banks. Indeed, even that $20 billion announced Wednesday will not be enough to completely stanch the bleeding at Bank of America — it says litigation over troubled mortgages could cost it another $5 billion in the future.

The proposed settlement is more than just another financial blow to a company staggering from the collapse of the mortgage bubble. It also represents a major acknowledgment of just how flawed the mortgage process became in the giddy years leading up to the financial crisis of 2008, typified by the excesses at Countrywide Financial, the subprime mortgage lender Bank of America acquired in 2008.

Ms. Patrick and her clients claim that Countrywide created securities from mortgages originated with little, if any, proof of assets or income. Then, they argue, Bank of America did not properly service these mortgages, failed to heed pleas for help from homeowners teetering on the brink of foreclosure and frequently misplaced documents.

Most of the loans in the pools covered by the settlement were underwritten at the height of the mortgage mania: in 2005, 2006 and 2007. But with borrowers soon unable to meet their monthly payments, defaults soared.

For the banking industry, the reckoning could not come at a worse time. On Wall Street, trading revenue has been devastated by the economic uncertainty in Europe, the anemic recovery in the United States, and the stock market swoon of the last two months.

What’s more, new regulations have already taken a big bite out of profits. Despite a modest amount of relief on Wednesday, when the Federal Reserve completed new rules governing debit card swipe fees, the banks stand to lose billions when the regulations take effect next month.

If all this were not enough, further weakness in the housing and job markets has reduced lending by the banks to businesses and consumers alike, cutting yet one more source of profits.

Nevertheless, investors appeared to endorse the proposed settlement, with Bank of America shares rising nearly 3 percent, to $11.14, a move mirrored by shares of other big financials.

Some experts said the settlement could prove good news for consumers and the broader economy, speeding the foreclosure process for hundreds of thousands of homeowners while potentially making it easier to obtain modifications of existing mortgages.

By providing a template for cleaning up past claims and setting standards for future practices, the settlement could make it easier for banks to bundle and sell mortgages again, a business that has been all but dead since the financial crisis.

“That is important for providing funding for people to buy homes, grow their businesses and create jobs,” said Michael S. Barr, a former assistant Treasury secretary who now teaches law at the University of Michigan.

The accord does not resolve an investigation by all 50 state attorneys general into allegations of mortgage service abuses by Bank of America and other major lenders that could ultimately cost the industry billions more in fines and penalties. Nor does it cover liability from soured home equity loans or bonds the bank created with mortgages from lenders other than Countrywide.

Gretchen Morgenson contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=191b3cb0fc65f09932a69666c8bf44e9

Filed Under: Business News Tagged With: , ,

Bucks: Making the Reverse Mortgage Decision

June 25, 2011 by Leave a Comment

In this weekend’s Your Money column, I look at what the decision by Bank of America and Wells Fargo to leave the reverse mortgage business will mean for the product and its future. (I actually think both will be back to originating these mortgages within a decade, but that’s another column.)

While I didn’t write much in the column about how people are using reverse mortgage proceeds these days, the sad fact is that plenty of people are using them to pay off back taxes, retire an original mortgage that they are late in making payments on or spending money on cars and vacations. Probably not the best use of the funds, but who am I to judge?

So how are you (or your parents) using the money you got from a reverse mortgage? And are you keeping the possibility of using a reverse mortgage in the back of your mind as a last-resort financial planning tool?

Article source: http://feeds.nytimes.com/click.phdo?i=50ee5f2f0c4ddaa73c83baf5866840fc

Filed Under: Your Money Tagged With: , ,

Bank Shares Take a Beating, and It May Not Be Over Yet

June 6, 2011 by Leave a Comment

They are cheap — selling at near their lows for the year, and trading at well below the valuation of other large companies. But Mr. Scanlon, who helps oversee $7.5 billion for the John Hancock family of mutual funds in Boston and specializes in financial companies, is not about to give in and buy more shares.

“It’s just not going to be a smooth ride,” he said. “You wake up every day and there’s a new headline and a new concern.”

Bank stocks took another tumble late last week after Moody’s, the credit rating firm, warned it might downgrade the debt of giants like Bank of America, Citigroup and Wells Fargo as the government eases back on support for the sector. Even as the market absorbed that news, reports that Goldman Sachs had been subpoenaed in an investigation by the Manhattan district attorney further unnerved investors, and sent that giant investment’s bank’s shares sinking.

Pessimism about the sector was reinforced by weaker-than-expected economic data, including a bleak reading on unemployment on Friday.

What’s more, well-known hedge fund investors like John A. Paulson and David Tepper have been quietly selling the big positions in the sector they had earlier amassed, a sign the smart money has already begun to bail.

Mr. Tepper, in particular, had made huge profits by scooping up beaten-down bank stocks when they bottomed out in late 2008 and early 2009 in the midst of the financial crisis and riding their subsequent recovery. But in the first quarter of 2011, he sold off about a third of his positions in Citigroup and Bank of America.

For Mr. Tepper, the timing was impeccable. Since the beginning of April, the KBW Bank Index has dropped 8 percent, compared with a much more modest 2 percent decline in the benchmark Standard Poor’s 500-stock index. Last week, bank stocks sank to their lowest point since early December.

For individual investors, who have long favored bank stocks as a source of dividends and at least the promise of stability, their recent performance has been a big disappointment. And few experts expect a turnaround anytime soon.

“I haven’t seen investor sentiment this bad in a long time,” said Jason Goldberg, a longtime bank stock analyst at Barclays. “Not owning the group has been the right call, and people are skeptical about getting back in.”

By many measures, the sector is pretty cheap. Diversified banks are trading at about 9.4 times earnings, compared with a multiple of 12.4 for the broader S. P. 500, according to FactSet Research.

But then, they may deserve to be selling at a discount. Besides the worries about a possible debt downgrade and the investigations into the role they played in the financial crisis, major banks are facing headwinds on many fronts.

For starters, federal regulations passed last year are set to cut deeply into revenue on everything from debit card transactions to trading on Wall Street.

The restriction on debit card fees, known as the Durbin Amendment after the senator who proposed it, Dick Durbin of Illinois, could alone cost the top 25 banks roughly $8 billion in lost revenue, Mr. Goldberg said.

The new regulations are set to go into effect on July 21, although Senator Jon Tester, Democrat of Montana, is pushing a proposal on Capitol Hill that could come up for a vote as early as next week that would delay their start by 15 months.

Even if Mr. Tester wins a reprieve for the banks, other rules in the broader Dodd-Frank bill, which overhauled financial regulations, could cost the industry another $8 billion, according to Mr. Goldberg.

In addition, new international rules now being developed to require major institutions to hold more capital as a buffer against future financial crises will also erode profitability. That is because money set aside as ballast is cash that will not be available to lend out or pay dividends or buy back stock.

More than any of the changes hurtling toward them is a more fundamental problem that banks face — revenue is stuck in neutral. And a huge chunk of profits is not coming from the actual business of lending money, but instead represents gains from the release of reserves set aside in the past for possible loan losses. As these costs have eased, that money for a rainy day has fallen to the bottom line.

Article source: http://feeds.nytimes.com/click.phdo?i=730022a9fa58cb100267f3986975ce9a

Filed Under: Business News Tagged With: , ,

Bucks: Chase Ends Test of $5 A.T.M. Fees

May 5, 2011 by Leave a Comment

Scott Olson/Getty Images

JPMorgan Chase quietly ended a test in which it was charging a hefty $4 or $5 fee for non-Chase customers in two states for access to its A.T.M.’s.

The change was noted this week by The Consumerist and others, although the pilot ended more than a month ago. The test began Feb. 8 and ended at the end of March, said Tom Kelly, a Chase spokesman. Non-Chase customers in Illinois were charged $5, and those in Texas were charged $4. The bank has gone back to the $3 fee it charged earlier.

Mr. Kelly wouldn’t say why the pilot was halted or what the bank learned from it — or whether higher fees might be coming nationally. Other big banks, including Wells Fargo, Bank of America and Citibank, also charge $3 to noncustomers for using their A.T.M.s. But smaller banks charge less and the average is less than $2.50, according to credit.com.

Banks are looking for ways to increase fee income ahead of the federal limit on so-called swipe fees, which merchants pay banks to help process credit and debit card payments. Banks tend to see higher fees for noncustomers as one way to raise fee revenue while avoiding alienating their own customers.

But there may be a limit on how much people will pay for convenience. I may grimace at a $2 or $3 fee to use another bank’s A.T.M., but I’ll pay it if I’m in a hurry — say, when I’m running to catch a flight — and another bank’s machine is handy. But I might try harder to find one of my own bank’s A.T.M.’s if the fee starts inching above $3. Or I might hunt for a new bank that has more A.T.M.s in my area — which is probably part of the plan when banks raise their fees.

At what point would a fee make you walk a few extra blocks? Or switch banks?

Article source: http://feeds.nytimes.com/click.phdo?i=250044d773f362d1826e276ae50d3c21

Filed Under: Your Money Tagged With: , ,

Report Criticizes Banks for Handling of Mortgages

April 13, 2011 by Leave a Comment

In response to the problems described in the report, mortgage servicers have signed consent agreements promising to put in new oversight procedures and make other changes. The examinations were conducted by the Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision. During their review, the examiners said they saw an unspecified number of cases “in which foreclosures should not have proceeded due to an intervening event or condition,” including families in bankruptcy or those qualified for or in the middle of a trial loan modification.

The servicers include Bank of America, JPMorgan Chase, Citigroup and Wells Fargo none of whom had an immediate comment. Two firms that handle aspects of the foreclosure process, Lender Processing Services and Mortgage Electronics Registration Service, also signed the consent agreement.

“Our enforcement actions are intended to fix what is broken, identify and compensate borrowers who suffered financial harm, and ensure a fair and orderly mortgage servicing process going forward,” the acting comptroller of the currency, John Walsh, said in a statement.

The report said that mortgage servicing departments of the banks did not properly oversee their own or third-party employees at law firms, had inadequate and poorly trained staffs and improperly submitted material to the courts.

As the enforcement actions have leaked over the last two weeks, they have been widely criticized by consumer and housing groups as little more than a slap on the wrist.

“The agreements are a huge disappointment,” said Alys Cohen of the National Consumer Law Center. “They rubber-stamp the status quo. The banks who caused the economic crisis and received government bailouts are getting a free pass while homeowners still struggle  to save their homes.”

The release of the report and enforcement actions came six months after the servicers’ handling of foreclosures became a major issue. The servicers, under pressure from lawyers representing homeowners, admitted to lapses last fall and began foreclosure moratoriums.

State attorneys general, who started a separate investigation, are still working with the Obama administration to change the foreclosure process in a more fundamental way. About two million households are in foreclosure and another two million near it.

Article source: http://www.nytimes.com/2011/04/14/business/14foreclose.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,
« Previous Page