BofA Reports Loss on Higher Costs for Sour Mortgages

Friday, 21 Jan 2011 07:29 AM

 

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Bank of America Corp. reported a loss of $1.6 billion Friday after its costs related to soured home loans increased.

The results reflected efforts by the nation's largest bank to clean up problems on its balance sheet dating back to the financial crisis. The deep slump in the real estate market has hampered Bank of America more than its competitors because of its 2008 purchase of Countrywide Financial, the country's largest mortgage company at the time.

"Last year was a necessary repair and rebuilding year," said CEO Brian Moynihan. "Our results reflect the progress we are making at putting legacy — primarily mortgage-related issues — behind us."

Bank of America's fourth-quarter loss after paying out preferred stock dividends was 16 cents per share. Analysts surveyed by FactSet had forecast the bank would earn 18 cents a share. Excluding a charge of $2 billion related to the home loans, the bank would have earned 4 cents a share.

The stock was down 7 cents, or less than 1 percent, to $14.47.

A year earlier, Bank of America had reported a loss of $5.2 billion after it repaid the government $4 billion in bailout funds it received during the financial crisis.

The bank's revenue fell 11 percent to $22.4 billion in the last three months of 2010.

Bank of America also kept aside $4.1 billion for bad home loans that it could be forced to buy back from Freddie Mac and Fannie Mae, two failed mortgage agencies that are now owned by the government, and other investors. It also set aside another $1.5 billion for litigation expenses related to bad mortgages.

Investors say the bank should take back the bad home loans because they were sold with improper documentation. Besides buying back bad loans, several banks were stung by accusations in the fourth quarter that they failed to properly review documents used in foreclosures. Attorneys general from all 50 states are conducting an investigation.

The results of the nation's largest consumer lender are a proxy of the financial health of millions of Americans. BofA reported that its borrowers are running behind on their loan payments less than they had been. That's consistent with what other major banks have been saying over the past week as they reported fourth-quarter results, including JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc.

For the sixth consecutive quarter, there were fewer people with late monthly loan payments at BofA. The bank's losses from lending in its credit card and home loan business declined $414 million from the third quarter of 2010 because of a drop in delinquencies and bankruptcies.

For the full year 2010, the bank reported a loss of $3.6 billion, compared to a loss of $2.2 billion in 2009.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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