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Bank of America Could Shell Out Billions: Should Investors Be Worried?

The Federal Housing Finance Authority recently announced that it reached settlements with financial institutions for nearly $8 billion in 2013 -- yet notably absent from the list was Bank of America (NYSE: BAC  ) , which was among the 17 institutions the FHFA sued in 2011. 

JPMorgan Chase (NYSE: JPM  ) led the way with $4 billion in settlements, but many have estimated that Bank of America could be on the hook for up to twice that much. Rating agency Fitch noted in an October report that at one point, Bank of America had $57 billion worth of mortgage-backed securities that were sold to Fannie Mae (NASDAQOTCBB: FNMA  ) and Freddie Mac (NASDAQOTCBB: FMCC  ) , versus only the $33 billion at JPMorgan.  

This led the agency to estimate that Bank of America could be on the hook for up to $8 billion -- the same amount the FHFA collected from all banks in 2013 -- when a settlement is finally reached.

In the video below, Motley Fool financial writer Patrick Morris lets investors know what that potential amount could mean to Bank of America and its investors moving forward.

The future of banking
The traditional bricks-and-mortar bank will soon go the way of the dodo bird -- into extinction, that is. This sounds crazy, but it's true. Every single one of the nation's biggest banks are dramatically reducing branch counts and overhauling the ones left behind. But despite these efforts, they're still far behind a single and comparatively tiny lender that's already leapt into the future. Since the beginning of 2012 alone, this company's shares are already up more than 250%. And they're bound to go higher. To download our free report revealing the identity of this stock, all you have to do is click here now.


Read/Post Comments (4) | Recommend This Article (3)

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 January 03, 2014, at 2:06 PM, jkahlon wrote:

    This is the third or fourth article on the same subject within a span of a few months.

    Why is MF so interested in taking down banks ?

  • Report this Comment On January 03, 2014, at 2:16 PM, kooper156 wrote:

    Your timing on this is really conspicuous.

    Wouldn't have anything to do with the move up would it?

  • Report this Comment On January 03, 2014, at 3:27 PM, stockmajor wrote:

    He said that BAC would likely have to pay out billions more in settlements but that they have well reserved funds for that purpose. He said this will not likely be a negative impact for shareholders. I agree.

  • Report this Comment On January 03, 2014, at 3:54 PM, Rusty56 wrote:

    Just ignore this MF author - kids trying to give us more seasoned people advice! I could buy him and spit him out over and over again!

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Patrick Morris

After a few stints in banking and corporate finance, Patrick joined the Motley Fool as a writer covering the financial sector. He's scaled back his everyday writing a bit, but he's always happy to opine on the latest headline news surrounding Berkshire Hathaway, Warren Buffett and all things personal finance.

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