bank of america

All posts tagged bank of america

Foreclosure is not a fun process.

Losing your house for any reason is a stressful, disheartening experience. And banks are notoriously difficult to deal with. Mainly because they’re not really interested in working out a deal with you. Especially if you have equity in your house.

That being said, I’m greatly amused by people who get the better end of the foreclosure process, especially when it comes to Bank of America. (I’m not a big fan of Bank of America – I have my reasons…)

Bank of America filed for foreclosure on a house in Florida, about six months ago. The strange thing was that the homeowners, Mr & Mrs. Nyergers, owned their home free and clear. They had bought their house with cash. They had never had a mortgage on it.

In court the judge found the bank wrongfully tried to foreclose on them. Basically he said BofA was trying to scam them out of their home, and ordered the bank to pay their legal fees.

So how did the couple end up foreclosing on the bank?

After more than 5 months of the judge’s ruling, the bank still hadn’t paid the legal fees, and the homeowner’s attorney did exactly what the bank tried to do to the homeowners. He seized the bank’s assets.

According to CBS, the attorney said, “They’ve ignored our calls, ignored our letters, legally this is the next step to get my clients compensated.”

Sheriff’s deputies, movers, and the Nyergers’ attorney went to the bank and foreclosed on it. The attorney gave instructions to to remove desks, computers, copiers, filing cabinets and any cash in the teller’s drawers.

After about an hour of being locked out of the bank, the bank manager handed the attorney a check for the legal fees.

“As a foreclosure defense attorney this is sweet justice” said Allen.

The unfortunate sad part is that bank errors like this are quite common.

The couple’s foreclosure attorney said he sees happen a lot in court, because banks didn’t investigate the foreclosure and it becomes a lengthy and expensive battle for the homeowner.

At least this story had a happy ending.

angelo-mozilo-head-of-countrywide-financialAngelo Mozilo, former CEO of CountryWide Financial was fined $67.5 million to settle charges of insider trading and civil fraud. Of this, $45 million or 66% will be paid by Bank of America, who acquired the toxic asset and must now indemnify the former head. As I mentioned back in early 2007, CountryWide insiders were dumping stock as fast as they while simultaneously publicly pumping it. Mozillo made about $134 million from insider trading and then another $100 million on the sale of the company to Bank of America. Having profited over $200 million, being fined a mere $22.5 million doesn’t seem like much of a punishment.

Of course, being a CEO of a major US financial institution seems to provide immunity against any wrongdoing.  Now and then, the SEC will prosecute someone to make an example of them, but the most part you can get away with far more than the average white collar criminal.

Meanwhile, Bank of America’s stock has been whacked this year, down 20% year to date. If Bank of America really did buy Countrywide for the tax losses, this investment just got better!

Bank of America (BAC) recently announced it would be buying Countrywide (CFC) for $4.1 Billion putting an end to rumors that CFC was considering bankrupcy.

Apart from gaining access to CFC’s technology, banking business and god-only knows what it has thats of any worth, Bank of America will also inherit it’s losses. According to tax guru Robert Willens, the tax break could total about $500 Billion dollars over the first five years and may even be worth considerably more from the sixth year, depending on how big Countrywide’s losses are when Bank of America formally acquires it.

This isn’t the first time this has happened. In 1988, Bank of America purchased the failed FirstRepublic Bank of Dallas in auction. Using a complex tax strategy allowed Bank of America to save $1 Billion in taxes.

Willens estimates that Bank of America will be able to deduct $270 million of Countrywide’s losses annually for the first five years it owns the firm, which would total $1.35 Billion! If Countrywide’s losses turn out to bigger, Bank of America gets to write off even more of its profits.

CFC’s CEO Mazillo will get a going-away present of $115 million, including company jet time and country club fees. Its not enough that he had been pumping the stock on CNBC for the past 18 months while simultaneously dumping $100 million worth of stock. He should be investigated by the SEC for painting a rosy picture of his company’s business when he must have known the stock was going to drop like a rock. If not illegal, it was definitely unethical.

On the other hand, Bank of America which currently owns 9.7% of US deposits will be breaking the law when it acquires CFC. Countrywide’s Bank has savings deposits which will push Bank of America over the federally regulated limit preventing individual banks from possessing more than 10% of all deposits. I guess they’ll just have to give the depositors some of their money back! It’ll be like a reverse bank-run.