Bank of America Feels Weight of Mortgage Settlements More Than Rivals

Bank of America Feels Weight of Mortgage Settlements More Than RivalsBank of America’s earnings have been weighed down by massive legal losses stemming from its disastrous acquisition of Countrywide Financial in 2008, a key player in the bubble buildup that preceded the subprime mortgage collapse.
As a result, the bank feels the impact of the toxic-mortgage era much more than its competitors.
Bank of America’s first-quarter profit missed Wall Street expectations Wednesday, with net income jumping to $2.62 billion, or 20 cents a share, from $653 million, or 3 cents, a year earlier.
Revenue fell across most of its businesses as the nation’s second-largest bank by assets said it has settled three mortgage-backed securities lawsuits related to its Countrywide unit for $500 million, the latest in a series of mortgage settlements that includes a suit brought by the Iowa Public Employees’ Retirement System.
There is also a pending settlement with Bank of New York Mellon at an estimated cost of $8.5 billion.
In the first quarter, Bank of America had litigation expenses of $881 million, although that was a drop from the $916 million set aside in the fourth quarter of 2012.
In addition to the Countrywide-specific lawsuits over bad loans, there is Bank of America’s involvement in the two big agreements over botched foreclosures affecting millions of homeowners, the National Mortgage Settlement and the Independent Foreclosure Review.
There was some good news in BofA’s first-quarter report. The bank extended more mortgage loans, even as the industry-wide surge in home refinancing eased. It issued $24 billion of first-lien mortgages, up 57 percent from a year earlier and up 11 percent from the 2012 fourth quarter.
“There were many examples of progress this quarter,” said Chief Financial Officer Bruce Thompson. “We reduced noninterest expense by nearly $1 billion year-over-year, and credit costs continued to decline. Our relentless focus on capital, liquidity, and expense reduction enables us to be in position to return excess capital to investors through the previously announced common stock repurchase program and preferred stock redemptions.”

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