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Bank of America Is Not Alone in Singing the Mortgage Blues

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When it comes to identifying the bank sporting the largest portfolio of troubled mortgages, all fingers point to Bank of America (NYSE: BAC  ) and its pile of smoldering loans belonging to Countrywide. Therefore, it's no stretch to assume that B of A is also foreclosing on the highest number of homes -- a fact borne out by a recent study by 24/7 Wall St. However, it may surprise you to know which bank ranks second in foreclosures: Wells Fargo (NYSE: WFC  ) .

Bank of America shares the pain
Considering the fact that Wells Fargo has been handling approximately one-third of all mortgage loan activity for the past year or more, perhaps this fact shouldn't be so startling. But Wells has always had a reputation for conservative banking, and it actually came out of the housing meltdown in better shape than its peers because of its minimal involvement in subprime lending after 2004.

Occupying slot No. 3 is JPMorgan Chase (NYSE: JPM  ) , which may be another surprise, since the bank is more often associated with shaky trading deals than unstable mortgages. But the bank revealed last year that it has a real loan default problem, which led to an increase in hiring when other banks were cutting back.

Study shows loans serviced, no necessarily owned
The numbers of homes in foreclosure at each bank -- over 96,000 at B of A, nearly 85,000 at Wells, and more than 54,000 at JPMorgan -- represent mortgages being serviced by the bank, which may or may not be loans sitting on the banks' books. According to the study, banks may service loans belonging to another institution, although servicing loans in default is a losing proposition.

However, considering how assiduously big banks have been dumping these mortgage servicing rights since new capital regulations have made them too expensive to hold, the number of loans being serviced by banks is likely dwindling.

Numbers show the malaise isn't over yet
Still, these numbers are extremely high, and uncomfortably concentrated in three megabanks. Of the 750,000 total homes in foreclosure as of last month, more than 30% are being dealt with by these three institutions. Of those loans currently in foreclosure, those considered underwater -- in this case, having a loan-to-value ratio of 125% -- make up more than 50% of the total for each bank.

Numbers like these bring home the stark reality that, as long as banks are harboring such vestiges of the housing meltdown, neither their recovery -- nor that of the housing market -- can be considered assured.

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Read/Post Comments (11) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 26, 2013, at 5:17 PM, airjackie wrote:

    Wow 1922 Amadeo Gianni an Italian/American founded Bank of America. He is said to have say he loved the US so much he wanted his bank named after America. Sad to see 90 years later the Bank is corrupt and helped bring the worse Global Crisis. Even today BOA is still illegally stealing homes. The resent news saw BOA sold a man's home by mistaken the address.

    John Piepont Morgan is rolling over in his grave as he watch CEO Jamie Dimon destroy the Bank and the good name. Morgan joined Rothchilds and bailout the US out during the Panic of 1893. Dimon is still committing the crimes as his paid Law Makers turn a blind eye.

  • Report this Comment On March 26, 2013, at 5:48 PM, AdamAAdams wrote:

    House-prices have gone way-up during the past year, and inventory has gone way down.

    So why the !@# are all these numerous 125% loan-to-value "foreclosures" still not being listed for sale on the MLS?

  • Report this Comment On March 26, 2013, at 6:04 PM, twhittlinger wrote:

    Perhaps someone can explain to me how it makes sense for banks to foreclose vs refinancing/lowering interest rate on loans. That way they still have the cash flow every month and would get back their investment over time that they had already calculated, lower profit (ie interest) BUT they are paying a lot less for their fed money too - so probably a break even overall. Instead they foreclose and the house detoirates and stays on the market for however long. How does that make sense?

  • Report this Comment On March 26, 2013, at 6:06 PM, twhittlinger wrote:

    OOOPPPPS me again looking for some understanding - all this talk about 'underwater' - if a person is not going to/have to sell their house - then they haven't lost anything! In fact, if they have any sense they have refinanced for a much lower rate in todays market and therefore their monthly cost is down. Housing markets flucuate and usually come back up and beyond the crash point. So if you bought your house as a home vs investment - how have you been hurt?

  • Report this Comment On March 26, 2013, at 6:17 PM, funfundvierzig wrote:

    Bank of America Has Remarkable DuPont-Like Culture of Dirty Play & Fraud!

    Readers, the media spotlight in investment circles has focussed on the big banks this week, particularly what we call Bilk of America, which formerly was the largest bank in the United States.

    Investors might keep in mind the Chairman of the Board of Directors and Chairman of the Executive Committee of the Bank of America Corp is the ex über boss of the DuPont Company, Chad O. Holliday, Jr. Holliday has no banking or financial background of which we are aware. Educationally, according to the DuPont Webbed-Site published several years ago, Mr. Holliday has only an undergraduate degree in "industrial engineering" from the U. of Tennessee, no earned advance degrees.

    DuPont can be characterised as one of the most unethical chemical enterprises on the globe in the 21st century with a long documented history of dirty-dealing and fraud-mongering. Evidence of lack of integrity includes criminal price-fixing, toxic Teflon chemical cover-ups, robbing Monsanto of superior patent-protected seed technology, FRAUD on the U. S. DIstrict Court hearing the Monsanto patent infringement case, as well as defrauding investors and the public as to DuPont lagging seed business and its phony right to "use" Monsanto's know-how, misrepresentation of DuPont medical products, breaking FDA rules, systematic lying about the toxic contamination of an entire town in West VA, Spelter, the tree-killing Imprelis consumer product fraud, BENLATE litigation fraud, numerous instances, worker-killing SHAM SAFETY in cost-slashed, decaying DuPont factories and cooking OSHA books, undsoweiter.

    The DuPont corporate culture is hardly what this struggling bank needs in the year 2013...funfun..

  • Report this Comment On March 26, 2013, at 6:48 PM, neamakri wrote:

    I searched county tax records and found 15 houses I might like to buy and flip. The 15 houses were owned by ten banks. I wrote a letter to each bank, with S.A.S.E., and detailed which properties I wanted. I requested short-sale paperwork. Not one of the ten banks even bothered to reply.

    So this is my lesson to share with Fools; banks are just idiots when it comes to handling foreclosures.

  • Report this Comment On March 26, 2013, at 8:07 PM, cliffcape wrote:

    @Neamakri: They didn't respond because they don't like wasting their time with non-serious inquiries. They know yours is not serious because you haven't even done enough research to know that if the banks are the owners then that means the foreclosures have already taken place. Short sales occur PRIOR to foreclosure when the owners still own the house.

    If the banks own it, you're just making an offer on the home and they are the sellers. No short sale involved.

  • Report this Comment On March 26, 2013, at 10:38 PM, birder1500 wrote:

    Those banks deserve all the pain they can get and more especially good old BAC. Sorry for the stock holders, but a fool has to learn his lesson sometime.

  • Report this Comment On March 27, 2013, at 12:03 AM, nitadono wrote:

    I don't know about anyone else dealing with Bank of America and troubled mortgages but I do know though I didn't have a problem with my mortgage and they contacted me and said , hey, how would you like to modify your mortgage. So I say of course, why not, it would be nice to save a couple of bucks. To go through BOA modification process is like pulling teeth, you can't get a body on the phone, they lose your paper work. And now after almost a year and no missed payments for their trial plan, they are saying I owe them thousands more than I would have if I kept up my regular payments. They are threatening foreclosure and my credit is shot because BOA says I didn't make my payments(I never missed any payments) and no one knows where the hell my money is!!! I can't go anywhere else now since they've destroyed my credit history. If I did my job like this I wouldn't have a job. Maybe if they actually worked fairly in a timely manner and not FRAUDULENTLY with their actual paying customers they wouldn't be in such bad shape.

  • Report this Comment On March 27, 2013, at 12:29 AM, vegasman40 wrote:

    I have tried 3x,s to get a remodification off of chase each x they said no ,I,m trying again to see cause we need the help every bill has gone up,and I got hurt about 5yrs. Ago my wife,s hours were cut done u tell them all this were just asking for a little help were not really behind but always real late cause all housing bills have been jacked up. Chase got billions and there big shots took there cuts and screwed the mortgage payers I think the banks should have been thrown under the bus just like the banks do to the payers

  • Report this Comment On March 27, 2013, at 12:49 AM, kayler wrote:

    I know of several buyers in California who can't find homes. Investors are buying up what they can and fixing them up. They are not putting them on the market they are holding them for prices to go up. And the banks are bloated with homes that are in bad shape, they will not fix them to sell them. Nor will they try to set up loans for borrowers to buy and fix them. In fact they are holding on to a lot of homes still. Something is just not right about it. Its like another bubble building and again working class people will be the ones hurt by it.

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