Bank of America (BofA) reported early this morning that they experienced a quarterly loss of $276 million due to a $6 billion legal bill. BofA had a rough 2013, as it was targeted by multiple entities and slammed with private litigation. The U.S. Department of Justice (DOJ), along with a variety of other government entities placed BofA in the crosshairs and went after them full-bore. Back in October, BofA was held liable for around $848 million in damages after loans acquired by Freddie Mac and Fannie Mae went south. Countrywide reportedly ran a scheme appropriately called “Hustle,” which resulted in the sale of rapidly deteriorating home loans to the GSEs.
“The cost of resolving more of our mortgage issues hurt our earnings this quarter,” said CEO Brian Moynihan.
The costs that Moynihan is referring to stems from a $9.5 billion settlement with the Federal Housing Finance Administration (FHFA) in the wake of BofA selling bogus mortgage-backed securities to Fannie Mae and Freddie Mac, directly contributing to the housing crisis. BofA also settled with Financial Guaranty Insurance Co. (FGIC) for around $900 million, as well as the Bank of New York Mellon over certain second-lien residential mortgage-backed securities (RMBS). There are still two remaining trust settlements with seven already completed. The results of those two settlements will obviously be reflected in the second quarter results for 2014. As of right now, BofA is expected to pay close to $50 million in additional costs for those remaining settlements.
Bank of America hangs their hat on helping 36,000 individuals find homes during the first quarter of 2014, whether through mortgages or refinances. They also highlight that, not factoring their litigation expense, their expenses were down around six percent.
BofA isn’t the only member of the Big Four bank club to have a dismal first quarter thus far. Wells Fargo and JPMorgan-Chase reported last week that they both had rough first quarters tied to mortgage issues and more.
