Bank of America Corp (NYSE:BAC) investors had plenty to celebrate this week as the company reached a historic settlement with bond insurer MBIA Inc. (NYSE:MBI). However, as they go into the bank’s annual shareholder meeting on Wednesday, many may have questions about a newly filed lawsuit against it charging it is violating the terms of the National Mortgage Settlement.
The announcement of this lawsuit seems almost to be timed so that it will be a talking point at the shareholder meeting. It is being brought by New York Attorney General Eric Schneiderman, who has brought several actions against banks associated with the mortgage crisis.
He’s had enough with Bank of America Corp (NYSE:BAC) and Wells Fargo & Co (NYSE:WFC) not abiding by the terms of the settlement based on the allegations he makes in this latest release detailing them. Since October 12, his office has documented 339 violations of standards the banks agreed to abide by, according to the release, which came out on Monday. The violations include the banks not notifying borrowers about any missing documents for processing loan modifications applications. Also, the banks are charged with not making a decision on complete loan modification applications within the required 30 days.
Bank of America Corp (NYSE:BAC) and Wells Fargo & Co (NYSE:WFC) were among the five mortgage servicers that agreed to the settlement. The others were Ally Financial, Citigroup Inc (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM). They are on the hook for $25 billion for their roles in several questionable mortgage loan servicing and foreclosure practices. This includes what has become known as robo-signing, a practice in which loans were approved for borrowers without due diligence steps being taken to verify them. These kinds of actions by the banks played a major role in the housing market collapse.
Bank of America Corp (NYSE:BAC)’s settlement toll has been far greater than any other bank that contributed to the financial crisis. However, the lawsuits the banks face have one commonality – deception. For example, Citigroup Inc (NYSE:C) this spring settled a $730 million lawsuit with the Arkansas Teacher Retirement Systems and Louisiana Sheriffs’ Pension and Relief Fund over allegations that it deliberately did not inform them about the full risks of the investment. That was the second largest settlement dealing with investor litigation born from the financial crisis.
Wells Fargo last year settled with the U.S. Justice Department for $125 million to compensate borrowers who were steered into sub-prime mortgages or who paid higher fees and rates than white borrowers because of their race or national origin.
J.P. Morgan is embroiled in a $2 billion lawsuit with Dexia, a European bank, that it was egregiously fraudulent when it sold it loans that secured debt it had purchased.
Schneiderman specifically named Bank of America Corp (NYSE:BAC) and Wells Fargo as the focus of this latest lawsuit, but he did not rule out going after the other three, notes Reuters.
In November, Bank of America reported that it had completed or approved a total of $15.8 billion in consumer relief for about 164,000 homeowners as of Sept. 30 through programs established under the National Mortgage Settlement.
In addition to the National Mortgage Settlement, Bank of America has had to contend with what could be its biggest headache – the fallout from buying Countrywide. It made the purchase of the mortgage lender in 2008, just before millions of dollars worth of toxic loans Countrywide had made came to light. Last month, it announced it had reached a $500 million settlement with several investors who charged Countrywide duped them into buying its risky mortgage-backed securities.
All of these settlements are zapping the profits the bank is reaping. For example, when the bank reported its first quarter earnings last month, it noted that revenues had climbed to roughly $24 billion. However, it reported that its profits for the upcoming quarter would miss guidance, and that’s partly due to the settlements.
The article N.Y. A.G. Gives BofA Shareholders News To Mull Ahead of Meeting originally appeared on Fool.com and is written by Tedra DeSue.
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