It's no secret: Bank of America (BAC 2.06%) needs to get moving on becoming a presence in the mortgage-lending arena.
CEO Brian Moynihan knows that the Federal Reserve wants to see income consistency if B of A is ever to raise its dividend and start buying back shares. While he's crowed about the 18% increase in mortgage loans originated at his bank over the past year, it's obvious that more needs to be done.
Even the head of the mortgage department at Pacific Investment Management wonders about the lack of gumption at B of A and Citigroup (C 3.06%), as these two let peers Wells Fargo (WFC 1.24%) and JPMorgan Chase (JPM 1.94%) soak up the bulk of the home-loan business.
While Bank of America's Countrywide experience has left scars, the bank desperately needs to put some of that old skittishness behind it, and it can start by putting to bed a couple of lawsuits that point up just how nasty those old days of mortgage-writing at B of A used to be.
New fraudclosure settlement is on the table
Bank of America, along with $26 billion foreclosure-settlement cohorts JPMorgan, Wells Fargo, Citi, and Ally Financial are currently negotiating with the government regarding further relief for homeowners fraudulently foreclosed upon. Approximately $3.75 billion would be set aside to help those who have lost their homes, with the rest going to aid those in danger of doing so.
Originally, the settlement entailed case-by-case reviews of troubled mortgage loans. These reviews were not being processed timely by the 14 banks involved in the settlement, which prompted the government to offer to speed things up. If all the banks agree to the terms -- and all are expected to do so -- these reviews will cease, money can be disbursed to needy former and current homeowners, and the banks can put this issue behind them.
This isn't the only legal action in regards to abuse of borrowers. Wells settled with the Dept. of Justice last summer, to the tune of $175 million, to close the books on charges of race discrimination in mortgage lending. Wells was accused of targeting Hispanics and African Americans for high-risk loans, and Bank of America was hit with this type of charge, as well.
B of A settled for $335 million in December 2011, but reparation is slow to arrive in eligible borrowers' mailboxes. Between foot-dragging by the bank, undeliverable notice letters, and the lag time waiting for those duly notified to respond, the original two-year wrap-up timeline looks doubtful.
One Fool's take
Wells and B of A have been hit with more discrimination suits than other banks -- but it hasn't stopped Wells from making boatloads of money on mortgage lending over the past year.
Bank of America, however, is stuck in a rut, in large part due to issues such as these. If the bank wants to impress the Fed in the next few weeks -- and it does -- it should step up the resolution of these lawsuits, which would show a willingness to put the past behind it, and move on. The first suit looks ready to go, but the latter one needs work from B of A to get it resolved. Time to get moving, Mr. Moynihan.
