Think the foreclosure crisis is over? Maybe not. In fact, the three banks – which, ironically are three of the biggest banks in the U.S. – still have more than 230,000 loans that are currently in some stage of foreclosure. In February alone, there was one foreclosure filed for every 849 homes.
Bank of America Troubles
As it turns out, Bank of America, which has had more than a few troublesome public relations disasters in recent months, leads the list with more than 96,000 of its mortgages in foreclosure. Makes one wonder how that breaks down for its totals, right? Coming second is Wells Fargo with 85,000 and JPMorgan comes in third with around 54,000 foreclosures. For those who insist the recession and resulting problems from it are a thing of the past, here’s your proof that for many, it’s still part of their daily lives.
What’s even more troublesome is the fact that while these foreclosures are moving forward, there’s a simultaneous movement, albeit it a slow one, that is compensating millions of homeowners for improper foreclosures foisted on them in recent years due to non-existent documentation and shoddy loan closings. The entire process should have moved forward in a smooth and seamless manner, but as we learned last week, it’s anything but.
Righting the Wrongs
The ongoing Independent Foreclosure Review and National Mortgage Settlement was put into place in order to not only right those wrongs, but also to provide information to banks and other lenders that would keep the same mistakes from happening in the future. The problem is, there have been no changes in the one place it should start: the financial sector as a whole. And further complicating matters is the fact that there are other dynamics at play, including third parties like Freddie Mac and Fannie Mae that buy the loans from the various banks and other lenders and then repackage them as securities for sale private shareholders. The banks are often little more than servicers by the time the process is complete, meaning they collect the payments and then push foreclosures when those loans go into default.
It should also be noted that Bank of America acquired troubled Countrywide’s assets and liabilities in 2008, so that plays a role in its numbers. According to 24/7 Wall St., the numbers break down rather simply. Bank of America’s average property value is around $204,000 and as mentioned, more than 96,000 of those mortgages are in foreclosure with 61% of them considered seriously underwater. Meanwhile, Wells Fargo’s average property value is slightly higher at $206,000. Of those, close to 85,000 are in foreclosure with slightly more than half considered seriously delinquent. Rounding out the top ten are PNC Financial Group at number nine and SunTrust Banks at number 10 with 8,545 and 6,001 foreclosures respectively. The average property value for PNC is $185,000 and for SunTrust, it’s $207,000. Slightly more than half of PNC’s foreclosures are seriously delinquent and for SunTrust, a whopping 64% are considered seriously underwater.
So why can’t Bank of America get it right and why does it seem for every positive move, there’s always another one to take it a step back? For one thing, Bank of America was one of the banks named in a lawsuit filed by Freddie Mac that includes accusations that it was involved in the massive, career-ending, life-changing LIBOR scandal. Specifically, the lawsuit says that Bank of America, along with Citigroup and JPMorgan, were involved and “colluded in order to artificially suppress the interest rate from Aug. 2007 to May 2010 in order to not only inflate their profits but to hide their growing financial problems.” Those are serious accusations, no doubt, and their trading activities reflect as much. Bank of America was down 1.64% by the end of the week and Citi was down 1.87%. Some are saying this black cloud is proof that its problems are not in the past. It could jeopardize the 2012 totals that doubled its stock.
Also, Bank of America launched its own version of a credit card and debit card swiping device for smartphones in late 2012. Its Mobile Pay on Demand is marketed through its Atlanta division and was called a “joint venture with First Data, Bank of America Merchant Services”. The problem was that it came into the game late, allowing its competing banks to beat it to the punch. Worse, folks were asking why Bank of America didn’t opt to partner with those who had already established their products and services in the market. Their version simply facilitated transactions while the competition offered then – and now – more options. It was going the “stand alone” route and because of that, it severely limited its options for moving into cloud services, or at a minimum, it put into place unnecessary roadblocks for itself for the future.
Salaries and Other Numbers
And let’s not forget the controversial announcement several weeks ago. Bank of America’s CEO Brian T. Moynihan’s salary was released and it showed he will receive a whopping 72% pay hike, which totals more than $12 million. Most of the raise will come in the form of stock based compensation, but it puts him squarely at the top of the highest paid bank CEOs in the country. It should be noted, however, that Moynihan has been cited for “single handedly turning the bank around” a few years ago. Granted, it’s had some tough roes with taking on Countrywide’s scandal; in all fairness, it’s difficult to hold any bank responsible for another’s disasters, and according to some who have done that very thing, they say the government “strongly encouraged” or “begged” them to take not only those troubled banks, but at different times, help from the government in the form of bailout money. We all know the big Jamie Dimon brouhaha where he infamously said his bank didn’t need the bailout, but that he was all but forced to take it.
Bottom line – Moynihan is a brilliant financial mind. It’s been tough for the bank and many say it’s all about the timing. Ask any analyst who’s worth his salt, and odds are, he’ll tell you his money is on Bank of America. Once it gets its PR shortcomings – and its foreclosures – taken care of and of course, the passage of time, this should be a bank that’s back to running on all cylinders in no time.