Three years ago this week, the acquisition-hungry CEO of Bank Of America looked at the menu of failing financial institutions and came upon a bargain bit of junk food called Countrywide that he could gobble up for only a couple billion dollars in BofA stock. Surely this little trifle couldn’t do any damage to his bank’s ironclad insides, right? But since that first bite of Countrywide, the nation’s largest bank has been praying at the porcelain god, barfing up billions in losses.
FBR Capital Markets analyst Paul Miller has been following the bank business for two decades and he tells the L.A. Times BofA’s takeover of Countrywide was “The worst by a mile.”
And the numbers back his claim up.
On top of that, BofA is putting aside $5.5 billion to pay out in similar demands from additional investors. This all came in the same week the bank announced $6.4 billion in mortgage-related charges for the second quarter of 2011. That’s more than $20 billion in a week.
And going back over the last three years, the numbers are staggering:
In January, BofA reached a $2.8 billion settlement with Fannie Mae and Freddie Mac over questionable loans sold to the two government-sponsored enterprises. The bank has settled for a total of $6 billion with Fannie and Freddie.
In May 2010, there was the $624 million setttlement of a class-action lawsuit brought by investors who claim Countrywide misled them about its lending practices.
Then there was the $3 billion in forgiven loan principal to homeowners with severely underwater mortgages in Massachussets. And let’s not forget the $1.1 billion to mortgage insurer Assured Guaranty Ltd. related to losses on Countrywide loans.