Mortgage Problems Continue to Haunt Bank of America

 

The biggest lender in the United States, Bank of America Corp., may have to book a charge totaling $8.5 billion in costs stemming from disputes over faulty mortgages and mortgages securities, according to a Bloomberg.com article written by Hugh Son. The company may take the charge in the fourth quarter of this year and the cost could grow even further with lawyers “smelling blood in the water” as put by Christopher Kotowski, an Oppenheimer analyst.

In a slide show last week, the bank pegged the cost of settling demands from private investors as being anywhere from zero all the way up to $10 billion. While the cost range is only considered a possibility, Kotowski says that he does “not believe that management would put a number like this into a presentation unless they thought there was a reasonably good chance that this will be the ultimate price-tag.”

Bank of America has already taken a $1.24 billion loss during the last three months of 2010 resulting from cost to end several mortgage securities disputes. The Bank also paid Fannie Mae and Freddie Mac $2.8 billion late last year, which according to the article leaves demands from private investors as the main concern of the shareholders.

Paul Miller, an analyst at FBR Capital Markets sees the putback costs likely to be in the range of $6 billion to $8 billion. According to the article, “an $8.5 billion charge would constrain tangible book value growth to about 4 percent this year”

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in investment-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 40 occasions. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their mortgage and CDO investment problems. For further information, please contact us.