Financials remains depressed despite the run-up in the Dow over the past five months. Bank stocks remain depressed. Bank of America trades at around $10 a share. Much of Bank of America’s problem is with its mortgage division.
Dow Jones reports: Bank of America Corp.’s (BAC) will take a massive blow of more than $20 billion in the second-quarter for various mortgage-related costs, including $14 billion the bank will put aside to repurchase soured mortgage loans from investors.
The costs show the continuing impact on the nation’s biggest bank from the housing crisis and its purchase of home-lender Countrywide Financial.
The bank will pay $8.5 billion to settle claims brought by a group of high-profile investors, including BlackRock Inc. (BLK), MetLife Inc. (MET) and Pacific Investment Management Co., or Pimco, who purchased mortgage-backed securities that subsequently went sour. Separately, the bank said it was taking a further $5.5 billion second-quarter provision tied to its exposure to government-run mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC) as well as other private investors.
The bank also expects to record $6.4 billion in other mortgage-related charges in the period, including $2.6 billion to write off the balance of goodwill in the consumer real-estate services business and roughly $4 billion that includes litigation costs and other writedowns related to servicing and foreclosure costs.