In a move that has to make the executives at Bank of America feel like there is no end in sight, shareholders of BoA filed suit yesterday claiming the Bank’s inability to properly move through foreclosures cost shareholders nearly half of BoA’s market value over the past year.
As reported in the Austin Business Journal, the suit claims BoA “did not properly record many of its mortgages when originated or acquired, which severely complicated the foreclosure process when it became necessary.” The real problem for BoA, which, based on my personal experience, always seemed to cross its t’s and dot its i’s, isn’t that it was funding terrible loans (while I’m sure there were some, the vast majority of BoA originated paper seems to be clean), but that it acquired a steaming pile of crap known as Countrywide Financial.
There is a reason BoA was able to purchase Countrywide Financial in the middle of 2008 for $4.1 Billion in stock when only 6 months prior, Countrywide reported over $250 Billion in assets in filings with the SEC.
It was a risky move at the time, and several financial commentators weren’t sure it was the best move for the banking behemoth. Charles Duhigg of the New York Times scratched the surface in this article right after the acquisition was announced, and several of his concerns have manifested themselves in the nearly 3 years since. Namely, BoA had no idea what they were getting into. At the time, BoA certainly didn’t realize Countrywide’s CEO, Angelo Mozilo was about to be indicted by the feds, and while those charges were recently dropped, don’t look for civil complaints against the man known as Agent Orange to stop anytime soon.
BoA also clearly did not realize just how bad was the paper Countrywide held, nor the breakneck pace they funded sub-prime loans through the early aughts. However, you would think when the CEO of countrywide dumped over $130 million worth of his stock in 2007, constituting over 1/3rd of his entire sales over the previous 25 years, red flags would go off. Apparently not.
Nevertheless, whether BoA failed to perform adequate due diligence, or simply determined the cost was cheap enough to outweigh the risk, it soon became apparent that in the short term, the acquisition was much more costly than $4 billion.
So…what does this all mean to you, the good readers of this blog? In a nut shell, it means we get giddy when any foreclosure dealing with Bank of America, Countrywide or Recontrust (Bank of America’s foreclosing unit) comes across our desk. Countrywide was so sloppy in its packaging and selling of loans, and Recontrust so disconnected from Bank of America in their foreclosure proceedings, its like a they are setting up our case for us.
If you are in foreclosure or have a loan with BoA, contact us for y our options. Those options are more than likely better than if you had used any other lender available at the time.