This News Sent Bank of America Corp (BAC) Higher Today

Further aggravating this bottleneck are regulations recently passed by the Consumer Protection Financial Bureau. Among other things, the new rules require that mortgage servicers wait at least 120 days before starting the foreclosure process.

It’s for this reason, in turn, that TransUnion believes the mortgage delinquency rate will remain above 5% through the first quarter of 2013. “It’s not clear yet, but recently announced regulatory rules related to mortgage servicing may tend to slow down this process further. What is clear from the data TransUnion collects is that, until the old vintages work through the system, we expect the delinquency rate to remain elevated.”

How the biggest banks are faring
For the largest lenders in the country, this news offers both a hard dose of reality and a further inkling of hope.

B of A and Citigroup Inc. (NYSE:C) in particular have struggled to work through billions of dollars of bad mortgages on their books over the last five years. In B of A’s case, its Legacy Assets and Servicing portfolio, which holds toxic mortgage-related assets, was sitting on $136.7 billion in loans at the end of the third quarter. And as I discussed here, Citigroup had a similar magnitude of bad mortgages in its own “bad” banking division, Citi Holdings.

This is likely the reason that B of A and Citigroup are leading their peers in the market today, up 2.7% and 3%, respectively, compared to the KBW Bank Index (INDEXDJX:BKX), which is up by only 1%.

Conversely, both Wells Fargo & Company (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) have already rebounded considerably over the past few years. Wells Fargo, in particular, is originating more loans now than it ever has. In the final quarter of last year, for instance, it underwrote a staggering $125 billion in mortgages — click here to see a chart of the nation’s five largest mortgage originators. And JPMorgan didn’t do so poorly itself, originating a second-best $51 billion over the same three-month time period.

While today’s news is still good for them, as evidenced by the performance of their shares which are up 0.5% and 1.3%, respectively, their more reasonable exposure to sour mortgages makes it a bit less so.

The article This News Sent Bank of America Higher Today originally appeared on Fool.com and is written by John Maxfield.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo.

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