Tags: BofA | Probes | Billion | Costs

BofA Sees More Probes, $5.1 Billion in Added Costs

Wednesday, 30 Oct 2013 08:19 PM

Bank of America Corp., the second-biggest U.S. lender, said the Department of Justice may file another suit tied to mortgage bonds and raised its estimate of possible added losses from legal and regulatory matters by 82 percent to $5.1 billion.

A U.S. Attorney’s office intends to recommend civil action against the Charlotte, North Carolina-based lender tied to the bundling of home loans into securities, the firm said Wednesday in its quarterly regulatory filing. The bank also said its eventual legal costs could exceed even its revised estimates.

New lawsuits could hinder Chief Executive Officer Brian T. Moynihan’s effort to end fallout from the 2008 credit crisis and purchases of Countrywide Financial Corp. and Merrill Lynch & Co. The bank has already spent more than $45 billion on litigation, settlements and refunds for investors to compensate for shoddy mortgage lending, servicing and foreclosures.

Bank of America’s $5.1 billion estimate of potential legal costs represents possible expenses beyond reserves at the end of the third quarter, and compares with $2.8 billion in the second quarter. The “current environment of heightened scrutiny” includes investigations and penalties that could hurt the bank’s reputation and trigger costs that exceed reserves and estimates of litigation costs, according to the filing.

Three Probes

Bloomberg News reported Oct. 22 that the lender faced three more U.S. probes over mortgage-backed debt after being sued in August over an $850 million bond. The potential civil action disclosed today is from one of those investigations, which are from U.S. attorneys offices in Georgia, California and New Jersey and involved either Countrywide or Merrill Lynch, said a person with direct knowledge of the situation.

Lenders are under pressure to re-evaluate their potential legal costs after JPMorgan Chase & Co., the biggest U.S. bank by assets, disclosed talks with the Justice Department to settle mortgage bond probes that could cost about $13 billion.

Mortgage lenders have faced demands for refunds from private investors and government-backed mortgage buyers such as Fannie Mae and Freddie Mac who claim the banks used lax standards to create loans that later went sour.

Bank of America is being scrutinized for violations of the Financial Institution Reform, Recovery and Enforcement Act of 1989, or FIRREA, people with knowledge of the plans said this month. The Justice Department cited that statute in the August lawsuit, which the company had flagged to investors in an earlier regulatory filing.

Jerry Dubrowski, a company spokesman, declined to comment beyond the filing.

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Bank of America Corp. said the Department of Justice may file another suit tied to mortgage bonds and raised its estimate of possible added losses from legal and regulatory matters by 82 percent to $5.1 billion.
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2013-19-30
Wednesday, 30 Oct 2013 08:19 PM
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