More on the Mortgage Insurance Issue
by Tom on December 28, 2009
in Market Musings
On Saturday, I told you about an article where S & P has downgraded the credit ratings of some of the main PMI companies. Now we’ve got a story about how Bank of America is suing MGIC saying that MGIC denied millions of valid claims on defaulted loans.
A couple of thoughts on this:
- I don’t think it was a misprint that Housing Wire said millions of claims rather than millions of dollars worth of claims. MGIC is one of the major PMI companies and Countrywide was one of the bigger 0% down lenders. Not a healthy mix.
- I would dare venture that a large portion of the reason for MGIC denying the claims has to do with, how shall we say it, the “caliber” of the documentation that’s in the files. Claims of fraud, misrepresentation, undue influence, all kinds of fun things are probably part of the reasons for the denial of the claims.
But the thing that I find most interesting about this article is MGIC’s response to it. The typical response is something along the lines of “We find these claims to be totally without merit and look forward to our chance to show that we are innocent of all charges.”
But what did they say? “We’re going to defend ourselves but we dont’ know if we’ll win and we don’t know what it’s going to do to us.”
When you take that and combine it with the fact that MGIC is already experiencing severe financial difficulties and it doesn’t bode well for mortgages with less than 20% down that aren’t FHA loans…….
Tom Vanderwell
BofA Sues MGIC Over Unpaid Insurance Claims : HousingWire || financial news for the mortgage market
Bank of America’s (BAC: 15.25 +0.39%) Countrywide Home Loans unit sued Mortgage Guaranty Investment Corp. (MTG: 5.99 +3.99%) over allegations the Wisconsin-based mortgage insurer denied millions of valid claims.The suit was disclosed in a Securities and Exchange Commission (SEC) filing. Countrywide and BAC Home Loans Servicing filed the suit against primary MGIC subsidiary Mortgage Guaranty Insurance Corp. (MGIC) in Superior Court of the State of California in San Francisco on December 17.
The case seeks declaratory relief against MGIC for what it says are valid claims against mortgages that defaulted. The case also seeks a ruling on the “proper interpretation of the flow insurance policies at issue.”
In the filing, MGIC said it intends to defend itself but is “unable to predict the outcome of this case or its effect on us.”
Technorati Tags: PMI, MGIC, Countrywide, Bank of America
Bank of America posts Huge Loss
So what’s the biggest reason for Bank of America’s losses?
Consumer credit – as the economy continues to struggle, it’s obvious that the consumer is still feeling the brunt of the troubles. Have the losses slowed down yet? No, they haven’t. Has the pace of the increase in the losses slowed, yes.
It isn’t over yet folks and until we can get a stable and financially healthy consumer, we aren’t going to see a sustainably healthy economy.
Now ask yourself, do these kind of losses in the banking sector square with the rise in the stock market and the “V” shaped recovery that the markets are hoping for?
Nah, I didn’t think so.
Tom Vanderwell
BofA Posts Loss Amid Consumer Credit Woes – Companies * US * News * Story – CNBC.com
Bank of America posted a wider-than-expected quarterly loss as improvement in its Merrill Lynch investment banking unit failed to offset consumer credit woes.The nation’s largest bank reported a net loss of $1 billion, or 26 cents per share, for the third quarter, compared with net income of $1.18 billion, or 15 cents per share, in the same period last year at the height of the financial crisis.
Technorati Tags: Bank of America
Bank of America CEO steps down…
Okay, a couple of thoughts about this one…..
- The head of the biggest bank in the country doesn’t leave with a 90 day notice unless someone was putting some serious pressure on him to get out.
- How big of a golden parachute do you think he gets?
- How many times do you think that the CEO of a major financial firm has stepped down without a successor being named in the last 10 years?
Yeah, sure the banking world is just fine……
NOT
Tom Vanderwell
BofA’s Ken Lewis Plans to Step Down By End of the Year – CEOs * US * News * Story – CNBC.com
Bank of America’s CEO Ken Lewis, the embattled head of the nation’s biggest bank, told the board he plans to step down by the end of the year.Lewis wasn’t asked to step down and the decision was not the result of any regulatory action, sources told CNBC. No successor has been named yet.
Technorati Tags: Bank of America, Ken Lewis
Another Reason
by Tom on September 28, 2009
in Market Musings, banks
Here’s another reason that people don’t trust a lot of mortgage lenders. Let me explain:
- Countrywide had a VIP mortgage program. So what, I don’t have a problem with them offering discounts to VIP’s. If Microsoft wants to cut Warren Buffett a deal on computers, so be it. But they should have a set “program” for it. In other words, if you want to do a special mortgage program for doctors, go ahead. If you want to do a special program for Oscar Winners, go ahead.
- But it appears that Countrywide didn’t have a set VIP program but maybe used it as a way to win political influence. Let’s see, I think Senator Chris Dodd got one of them “VIP” mortgages. I wonder if that’s influenced his voting and thinking on the banking world?
- And now that people want to find out more about what’s been happening in the VIP program, guess what…..
Yep, Bank of America has erased all of the tapes of those recorded conversations.
So they had a VIP program, they used it to influence government officials and they erased evidence of it.
That doesn’t make me suspicious, does it make you suspicious?
Tom Vanderwell
Phone Calls Add to Din Over Loans – WSJ.com
The discovery that Countrywide Financial Corp. recorded phone conversations with borrowers in a controversial mortgage program that included public officials — and that those recordings have been destroyed — has prompted new congressional calls for more information about the program.Rep. Darrell Issa of California, the ranking Republican on the House Oversight and Government Reform Committee, is trying to subpoena the remaining records of Countrywide’s VIP loan program. So far, the committee’s chairman, New York Democratic Rep. Edolphus Towns, has turned down that request.
The committee’s Republican staff investigators have spent months looking into the VIP program and learned of the call-recording system from a former Countrywide employee, according to a spokesman for Mr. Issa.
The Issa spokesman said that when the investigators contacted Bank of America Corp., which purchased Countrywide in July 2008, the bank acknowledged the existence of the recording system but said all the VIP program-related calls had been disposed of.
Bank of America, Citibank and Animal House?
by Tom on July 16, 2009
in Market Musings, Videos
Animal House –Dean Wormer Double Secret Probation
Am I the only one who finds this hypcritical?
On the one hand, Bank of America is strenuously objecting to the government’s findings that they need more cash.
On the other hand, they are trying to raise more cash. What’s up with that?
Tom Vanderwell
Bank of America Plans to Raise $10 Billion in Capital – Financials * US * News * Story – CNBC.com
Bank of America is working on plans to raise more than $10 billion in fresh capital, even as it and Citigroup launch last-ditch attempts to convince the U.S. government they do not need to bolster their balance sheets, the Financial Times reported.
The Quality of Earnings…..
by Tom on April 20, 2009
in Market Musings, Videos
David Faber from CNBC shows how Bank of America’s not in as good of shape as the headline earnings would report. That’s probably a large portion of why the stock market is down today.
Fed to the Rescue, Grants Bank of America $20 Billion More and agrees to take on $118 Billion in losses
…….when the U.S. Treasury and Federal Deposit Insurance Corp. announced in a press release the government had agreed to invest an additional $20 billion into the banking giant. The $20 billion in TARP funds will be exchanged for preferred stock with an 8 percent dividend to the Treasury.
The Treasury and FDIC have also agreed to share losses on $118 billion of the company’s assets. The large majority of these assets were assumed by Bank of America as a result of its acquisition of Merrill Lynch & Co., finalized as of Jan. 1, the press release said.
Tom here…..
1. The Fed wrote a $20 Billion check to Bank of America today.
2. They also agreed to take on $118,000,000,000 worth of losses.
What do you think it would take for the government to take on a share of the losses I’ve experienced in my 401k?
Bank of America to Get Billions in U.S. Aid – WSJ.com
WASHINGTON — The U.S. government has agreed to commit billions in additional aid to Bank of America Corp. to help the nation’s largest bank by assets close its acquisition of Merrill Lynch & Co., according to people familiar with the situation.
Discussions over these funds began in mid-December when Bank of America approached the Treasury Department. The bank, already the recipient of $25 billion in committed federal rescue funds, said that it was unlikely to complete its purchase of the ailing Wall Street securities firm because of Merrill’s larger-than-expected losses in the fourth quarter
Bank of America to Get Billions in U.S. Aid – WSJ.com.
What’s a few more billion among friends?
Seriously folks….
Citibank is in trouble and about to announce a MASSIVE restructuring (aka layoffs).
Bank of America needs Billions so they can buy Merrill. Why? Because Merrill’s in worse shape than we thought.
Lot’s of fun times….
Bank of America Will Cut At Least 30,000 Employees Before 2012
by Tom on December 11, 2008
in Market Musings, banks
Bank of America announced Thursday it will eliminate between 30,000 and 35,000 employees within the next three years. The staff reduction is a response to the pending merger with Merrill Lynch & Co. Inc. (MER: 12.67 -10.14%) and the weak economic environment, “which is affecting the level of business activity,” according to a B of A press statement.
A final number of eliminations will not be determined until early 2009 and details had not been determined and were not available at the time this story was published. The job reductions will come from both companies and will affect all lines of business, B of A said.
A couple of thoughts about this report…..
- My condolences to the 30,000 Bank of America employees who are soon going to find that they are out of a job. I wish I could say that there are lots of banking jobs out there for them to get hired elsewhere, but this is, in my take, evidence that the market is shifting and the demand for credit isn’t going to be nearly as high going forward.
- The news says that the job losses are a combination of the merger and the weaker environment. I’m guessing that the portion of the job losses attributed to the Merrill merger is no more than 50%.
If you believe, as I do, that the country (and the world) are changing their views on the use and long term acceptability of a credit financed lifestyle, then seeing this isn’t a huge surprise.
More to come, stay tuned.
