Bank of America Loses More Money Due to High Mortgage Loan Defaults

Bank of America Loses More Money Due to High Mortgage Loan Defaults

According to this Bloomberg article, Bank of America Posts Third-Quarter Loss on Defaults, in the 3rd quarter of 2009, Bank of America had its second quarterly losing quarter this year when it posted a $1B loss for the third quarter.  The loss was attributed to the sagging economy and high mortgage and consumer loan defaults.  To date, Bank of America has taken 2 government bailouts.

The article quotes Harvard University professor Niall Ferguson as saying "The idea that the financial crisis is over is a fantasy and it looks like the numbers bear that out.  It’s clearly not over for Bank of America." According to the article, Bank of America "said the provision for credit losses was $11.7 billion, with $9.6 billion of loans considered uncollectible. Reserves for future losses increased by $2.1 billion, compared with a $4.7 billion addition in the previous quarter, the statement said. The bank’s reserve is now 4 percent of total loans, compared with 4.7 percent at JPMorgan Chase & Co. and 5.9 percent at Citigroup Inc., analyst John McDonald of Bernstein Research said in a report today.  Bank of America said net write-offs of uncollectible loans rose 11 percent from the second quarter to $9.62 billion. The bank wrote off $3.2 billion of home loans, including home equity loans, during the quarter, up 10 percent from the second quarter. Charge-offs on credit cards increased 5 percent to $2.17 billion." Again, this is a debt problem. All forms of debt (mortgages, car loans and consumer loans) are performing poorly.

As I said in some previous blog posts a lot of the "record profits" reported by big banks such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. are due to profits from their trading activities (risky - could just as easily be huge losses) and write downs on their own debt (as the value of their own debt (bonds) declines due to the poor financial condition of the banks they are able to book the decline in the value of their debt as income). The big banks are making lots of fee income from writing mortgages, overdraft fees, credit card fees, etc., but are not actually lending much money. Almost all of the loans made by the big banks are being bought by the US government (via Fannie Mae and Freddie Mac) so when they go bad it will be the US taxpayer who will be taking the loss. This is type of lending (i.e. riskless to the mortgage company writing the loan as they are little more than a loan broker) is one of the causes of the financial mess we are currently in. Bank of America is no different than the other big banks in that most of BofA's earnings growth came from their acquisition of investment bank Merrill Lynch, which made made money primarily through trading activities. One of my concerns beyond the government buying all those loans is what happens when the investment banks lose money via their trading activities. The government will probably have to bail out the banks again. Does this knowledge encourage the banks to take on extra risk since they will not have to pay the full cost of trading losses? That remains to be seen.

According to the article, "Bank of America expects to add to its 20.5 percent share of U.S. home lending over the next five years, Barbara Desoer, president of home loans and insurance, said in an Oct. 14 interview. Home loans not accruing interest increased by 14 percent to $16.5 billion, or 6.9 percent of the bank’s loans and foreclosed properties, the bank said." In other words, nearly 7% of Bank of America's mortgage and home loans are not producing any income because the borrowers are not making payments. Therefore, how can Bank of America increase their mortgage lending? Simple, they will make a ton of new loans (in order to generate fee income), which will be purchased by the US government via Fannie Mae and Freddie Mac, thus transferring the risk to the US taxpayer. The result of these activities will be more short sales and foreclosures.

If you are a homeowner in Middle Tennessee who has defaulted on your Bank of America, or other, mortgages, just cannot pay your mortgage due to income loss or unemployment, or your home is already in foreclosure, please contact me to discuss your options including a loan modification or a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

If you need to sell your home through a short sale, or pre-foreclosure sale, you can request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Expert.

Bank of America Increases Loan Modifications

Bank of America Increases Loan Modifications

According to this CNBC article, Bank of America Ups Its Foreclosure Prevention Efforts, Bank of America "increased the number of customers with a trial mortgage modification by 62% in September to 95,000" and "increased the total number of modification offers under the Home Affordable Modification Program to 156,000 last month, versus 125,338 in August" which is an increase of nearly 25%.

According to the article, "Data on success rates at this point is limited and in a way lagging. The program is barely six months old and its terms require that a modified loan stay current for three months to be considered a success." Personally, I do not think being current for 3 months is successful at all.

The article quotes a Bank of America document as saying "With sustained high unemployment, even the most aggressive loan modification program will not help where there is no income." In my opinion, this is the real issue: unemployment.

The article states "The government program also includes a refinancing component, which is meant to decrease the number of potential defaults. BofA says that as of September it has taken more than 144,000 applications in that category and funded some 60 percent of them. According to August Treasury data, the bank has the largest number of loans that are 60 days or more past due (836,000)—a key benchmark of delinquency and foreclosure barometer. Foreclosures continue to run at a record rate, despite a multitude of government and private programs. The problem has spread well beyond its original flash point, the subprime sector. The program is designed to help homeowners already in trouble (the loans have become delinquent) and those who may be heeded for it. Loan services receive a fee of $1,000 per loan modification. In addition, they receive a $1000 a year for three years if the modified loan stays current. The program also covers underwater borrowers. The loan-to-value ratio, which started out at 105 percent, is now 125 percent, meaning a homeowner with a $250,000 loan on a property valued at $200,000 is eligible for refinancing aid."

There are a few reasons why these increased loan modifications will still fail:

• Job Losses - You cannot pay your mortgage if you do not have a job.
• Number of Foreclosures - The number of foreclosures far exceeds any loan modification efforts.
• Underwater Homeowners - Even if the bank lowers their payments by a few hundred dollars per month many homeowners will still default due to owing far more than their home is worth.

In some cases, though, a loan modification is the right option for a homeowner.  It all depends on their personal situation.  If you are a homeowner in Middle Tennessee who is interested in a loan modification please call me for a free consultation.  I can give you valuable information on how to improve your chances of getting your loan modification request approved.  On the other hand, if you are a Middle TN homeowner who  is unemployed, have seen your income decline substantially, are already in foreclosure, have already been turned down for a loan forbearance or loan modification, and your home is worth less than your mortgage balance(s), please contact me to discuss selling your home via a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

If you need to sell your home fast via a short sale you can my request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure Expert and REALTOR.

Bank of America CEO Will Resign at the End of the Year

According to this New York Times article, Bank of America Chief to Depart at Year’s End, Kenneth D. Lewis, will resign at the end of 2009. According to the article, he "celebrated his daring takeover of Merrill Lynch as the crowning triumph of a long career. On Wednesday, that conquest proved to be his downfall, as he announced his resignation after months of legal and political scrutiny over how the deal went down. Mr. Lewis leaves as Congress, the attorney general of New York and investors turn up pressure on the bank over not disclosing Merrill's losses and bonuses to shareholders. A federal judge recently refused to accept a settlement brokered between Bank of America and the Securities and Exchange Commission, saying the bank and the commission never fully explained how the decisions were made."

I think all the bank CEO's should step down right now as they have mismanaged their banks and collected millions in pay and bonuses despite their failings. The banks has completely botched the handling of pre-foreclosures, short sales and foreclosures. I am personally dealing with Bank of America on a short sale located in Murfreesboro Tennessee (Rutherford County TN) and I was able to get approval within 3 weeks, but it took a lot of phone calls and emails to push them to a decision. It just should not be that difficult. As a result of Bank of America's incompetence (and the incompetence of other lenders) there are more short sales and foreclosures in Middle Tennessee (in the Nashville TN area) than there should be. Goodbye Mr. Lewis!

If you are a homeowner who cannot pay your mortgage payment(s), or are already in foreclosure, my recommendation is that if you should do the following:

1. Loan Modification - Even though you do not have a good chance of getting a loan modification approved by your lender(s), you should give it a try.  Therefore, contact your mortgage company immediately to discuss a loan modification.
2. Discuss your situation with a real estate attorney and/or bankruptcy attorney to discuss your options if the loan modification is not approved.
3. If a loan modification will not work, or is not approved, and you owe more than your home is worth and you cannot pay you mortgage, you need to speak with a REALTOR who specializes in short sales and pre-foreclosures (preforeclosures) to discuss selling your home.

If you live in the following areas, please contact me as I can help you get out of this situation.

• Rutherford County Tennessee: Murfreesboro TN, Smyrna TN and La Vergne TN (LaVergne TN)
• Williamson County Tennessee: Brentwood TN and Franklin TN
• Davidson County Tennessee: Nashville TN and Belle Meade TN