Over the past three months, ETFs in the financial sector have surged higher thanks to declining fears over European debt crises and solid bank earnings that have managed to keep loan losses in check despite slow growth levels in many developed markets. However, just when everything seemed to be back to normal in the banking sector, the latest scandal hit -- this time regarding the industry's treatment of foreclosures.
In this newest issue, many of the largest financial institutions in the country have been accused of falsifying documents and illegally evicting people from homes. In fact, some are claiming that, "the banks may have purposely lost the loan documents in order to mislead investors." By some estimates, close to $154 billion in defaulted home loans fall into this category of mortgages, which could require more scrutiny and could be suspected of having faulty paperwork or outright fraud. In response to this growing crisis, a number of banks had halted all foreclosure proceedings across the country in an attempt to get a better grip on the situation and figure out how to move forward.
One company that has been at the heart of the issue has been the financial giant Bank of America
The company looks to remain in focus later today as it reports its third-quarter earnings. Analysts expect the lending giant to post earnings of 16 cents a share on revenues of $27.2 billion, figures that compare favorably to last year's numbers for the same quarter, which showed a loss of 26 cents a share on similar revenues. While the company's profits are important, look for comments on the company's plan to deal with the rising foreclosure problem and guidance for the rest of 2010 to drive the stock during Tuesday trading [see Beyond XLF: Five Alternatives To The Popular Financial ETF].
With this report on tap, the RevenueShares Financial Sector Fund
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