Bank of America (BofA) is a tough company to love. They’ve gotten themselves embroiled in a variety of lawsuits over the years since the economic meltdown, as well as engaged in multiple rounds of layoffs at a time when jobs were sorely needed, mostly while profits were “soaring,” according to quarterly earnings reports. A recent feature by Bloomberg highlights some of the shadier practices BofA employed once President Obama’s Home Affordable Modification Program (HAMP) went into play.
In 2010 alone, there were more than 15,000 complaints forwarded to BofA CEO Brian Moynihan’s office, according to the Bloomberg piece. Along with countless other holdups, those submitting complaints were stonewalled with a comedy of errors from being told they were missing paperwork to flat-out lies. Those looking to have documentation processed for HAMP-related modifications were told they were denied modifications while their application was still being reviewed by officials.
In that same Bloomberg article, former employees of a company paid by BofA to handle HAMP-related paperwork, came forward to discuss BofA and Urban Lending (the contracted company)’s tactics in holding up or denying HAMP modifications. “Everyone knew that we weren’t helping people,” said Erik Schnackenberg, a former Urban Lending customer service manager. “They were giving us all the pressure and none of the power to change anything. It was this absurd, self-contained ecosystem of worthlessness.”
As if that public relations nightmare wasn’t enough, BofA will also be paying over $130 million to the Securities & Exchange Commission (SEC) in a CDO settlement. The CDOs in question were sold during the 2006-2007 period and reportedly involved hedge fund manager Megnetar Capital LLC. There are two CDOs in play, each costing BofA around $56 million in fees to the SEC.
Magnetar Capital released the following statement regarding the CDO issue: “Magnetar has cooperated with the SEC on CDO matters since 2008. At no point during this period has the SEC taken any action against Magnetar.
In light of the settlements announced today, we are happy to report that the SEC has issued a closing letter to Magnetar, which confirms that the staff has completed its investigation as to Magnetar’s activities regarding the relevant CDOs and will not recommend any action against the firm, its funds or any of its personnel.
We are pleased that these matters are now behind us, and look forward to continuing to serve the interests of our investors with the highest regard to ethical, industry and legal standards.”
While these are two drastically-negative things to happen to BofA over the past week or so, there’s a silver lining. The third quarter saw a net income of around $2.5 billion. The fourth quarter is estimated to see increased earnings resulting to around $.25 a share, according to Bloomberg. So, even though BofA are paying out to the SEC, even though they’re being slammed in the press for delaying HAMP modifications and just generally gumming up the works regarding HAMP in general, their fourth quarter will surely be fantastic and Brian Moynihan will most likely still be an incredibly happy man this Holiday season.
