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Mortgage Servicing Settlements Stunt BofA's Q4 Profit

NationalMortgageProfessional.com
Jan 17, 2013

Bank of America Corporation has reported net income of $0.7 billion, or $0.03 per share, for the fourth quarter of 2012, compared to $2 billion, or $0.15 per diluted share in the year-ago period. BofA's fourth-quarter 2012 revenue, net of interest expense, was $19.6 billion; excluding $3 billion of provisions for representations and warranties and obligations related to mortgage insurance rescissions related to settlement agreements with Fannie Mae revenue net of interest expense was $22.6 billion. “We enter 2013 strong and well positioned for further growth,” said Chief Executive Officer Brian Moynihan. “Double-digit growth since last year in mortgage production, commercial lending, and Global Markets revenue demonstrates the power of deeper customer and client relationships as we intensify the focus on connecting all our capabilities.” BofA's Q4 financials were negatively impacted by a provision of $2.7 billion related to the settlements with Fannie Mae with respect to representations and warranties and compensatory fees; other provision items of $2.5 billion which included a $1.1 billion provision for the Independent Foreclosure Review (IFR) acceleration agreement, total litigation expense of $0.9 billion and a $0.5 billion provision for obligations related to mortgage insurance rescissions; and $0.7 billion of negative debit valuation adjustments (DVA) and fair value option (FVO) adjustments due to improvement in the company's credit spreads. Bank of America funded $22.5 billion in residential home loans and home equity loans during the fourth quarter of 2012, up 41 percent from the fourth quarter of 2011, excluding correspondent originations of $6.5 billion in the year-ago quarter. The company exited the correspondent business in late 2011. The number of 60-plus day delinquent first mortgage loans serviced by Legacy Assets and Servicing declined by 17 percent during Q4 to 773,000 from 936,000 at the end of Q3 of 2012 and 1.16 million at the end of Q4 of 2011. "We addressed significant legacy issues in 2012 and our strengths are coming through," said Chief Financial Officer Bruce Thompson. "Capital and liquidity remain strong and credit continues to improve. Our primary focus this year is to grow revenue, manage expenses and drive core earnings growth."