More big bank customers jumping to credit unions, reports say

Even as big banks begin to back off proposed fees, disgruntled consumers may be jumping ship to credit unions, according to new reports this week.

The Credit Union National Assn. said that at least 650,000 customers have opened new accounts at credit unions this month –- more than the 600,000 total who joined in 2010. That equates to $4.5 billion in new savings accounts over about four weeks.

The trade group attributed much of the growth to customer flight from institutions such as Bank of America Corp., which announced a new $5 debit-card fee in late September only to claw back the plan this week after heavy consumer backlash.

A poll Thursday from research firm Harris Interactive found that Bank of America customers are more likely to abandon the company than patrons of other banks and credit unions.

Nine percent of consumers using Bank of America said they were “not at all likely” to continue, compared with 6% of Wells Fargo & Co. users, 3% of JPMorgan Chase & Co. users and 2% of credit union users.

Fifteen percent of Bank of America customers said they don’t feel valued by the bank, compared with just 0.5% of credit union customers. Three quarters of credit union users said they had a “trustworthy relationship” with their institution, compared with a quarter of Bank of America customers.

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Senators want banks to simplify checking account fee disclosures

-- Tiffany Hsu

Photo: Tim Boyle / Getty Images

Senators want banks to simplify checking account fee disclosures

Emboldened by Bank of America's decision to abandon a proposed $5 monthly debit card fee, two senators on Thursday asked regulators to require banks to provide customers with a simple, one-page form listing all their checking account fees.

The goal is to give consumers a standardized, easy-to-understand disclosure form to make it easier to  compare fees charged by banks.

"When consumers are informed and can make choices, that's when the free market is at its best and strongest," said Sen. Dick Durbin (D-Ill.), who was joined by Sen. Jack Reed (D-R.I.) at a Capitol Hill news conference.

The two want banks to voluntarily adopt such a disclosure. But they also wrote to Raj Date, the acting head of the new Consumer Financial Protection Bureau, requesting that the agency act quickly to require banks and credit unions to post such a disclosure form on their websites.

Durbin and Reed touted a one-page disclosure form proposed by the Pew Charitable Trust. The form lists all basic checking account terms and conditions, including interest rate, ATM fees, overdraft penalties and account closing fees.

Susan Weinstock, director of the project, said the form was developed after analyzing 250 types of checking accounts last year.

"A hundred and eleven pages -- that's the median length of disclosure documents from the 10 largest banks in the United States," she said at the news conference. "These documents are not user-friendly, with highly technical and dense text."

Pew tested its form with consumers in Los Angeles, Philadelphia and Minneapolis. Two of the nation's three largest credit unions -- the Pentagon Federal Credit Union and the North Carolina State Employees' Credit Union -- have agreed to use the form to post fees on their websites, she said.

Durbin led the fight to enact new limits on the fees that banks charge to retailers to process debit card payments. BofA proposed its monthly debit card fee to offset money it expects to lose because of the limit, which took effect Oct. 1. Some other large banks were testing a fee as well.

Strong consumer backlash led the banks to abandon those plans. BofA, which triggered much of the ire, announced its decision Tuesday. 

Durbin, who had urged BofA customers to switch to other banks, said a simple checking account disclosure was the logical next step to empower consumers after they beat back the debit card fees.

Date, of the CFPB, said the agency would push in the coming months for more transparency on checking account fees.

"A checking account is a critical, valuable product for millions of Americans," he said Thursday. "But checking accounts and debit cards often come with unexpected costs and fees that can quickly add up. With upfront and easy-to-understand information, consumers can comparison shop for the best deal for them."

Date did not indicate whether he would push for a rule, which could take up to two years to enact, or seek a voluntary agreement by banks to adopt a simpler disclosure.

Richard Hunt, president of the Consumer Bankers Assn., said his members "support clear and easy to understand disclosures" and would work with the CFPB, as they have been doing recently on a new simplified mortgage disclosure form.

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BofA cancels plans for $5 a month debit-card fee

Chase opts out of debit-card fee

BofA debit card fee prompts animosity from coast to coast

-- Jim Puzzanghera in Washington

 Photo: Sen. Dick Durbin (D-Ill.). Credit: Associated Press.

Bank of America abandons plan to charge $5 debit card fee

Bowing to a national flood of protests, Bank of America Corp. is calling off its plan to charge customers $5 a month for using its debit cards to make purchases -- a strategy that proved a public relations disaster for what once was America's biggest bank.

Analysts had believed the rest of the banking industry would follow BofA in imposing similar fees to make up for new rules restricting the fees banks charge merchants for accepting debit cards.

But instead, the Charlotte, N.C., banking giant finds itself following the lead of a host of rivals who decided last week not to incur the wrath of the American public with debit-card fees.

Bank of America lost its No. 1 ranking in asset size to JPMorgan Chase & Co. at the end of September, though it still has the most total deposits. It announced its decision on the debit fee Tuesday morning in a two-paragraph statement citing "customer concerns and the changing competitive marketplace."

“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” David Darnell, BofA's co-chief operating officer, said in the statement.

“Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

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BofA backpedals on $5 debit fee

Another fee bites the dust: Wells Fargo backs off debit charge

-- E. Scott Reckard

Photo: Bank of America headquarters in Charlotte, N.C. Credit: Getty Images / Davis Turner 

BofA backpedals on $5 debit fee

Bank of America plans to make it much easier for customers to dodge its planned $5 monthly fee for debit cards, a person familiar with the bank's strategy says.

The $5 fee, which has triggered a storm of criticism, isn't going away. But under proposed revisions to the plan, "most of our customers won't pay it," according to the person, who spoke on condition of anonymity because the changes haven't been finalized.

Bank of America initially had said it would waive the fee only if a customer had a BofA mortgage or $20,000 in accounts at the bank and its Merrill Lynch brokerage.

It's now planning on lowering the minimum balance requirement significantly, although the final figure hasn't been set. Customers also would be able to dodge the charge by using BofA credit cards or making certain direct deposits.

The bank is going to start charging the debit card fee at a yet-to-be-determined time next year.

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Chase opts out of debit-card fee

Citibank is next with a new banking fee

Survey: Debit card users may switch banks over fee

--E. Scott Reckard

Photo credit: Lucas Jackson / Reuters

BofA will make it easier for customers to dodge $5 debit fee

Bank of America plans to make it much easier for customers to dodge its planned $5 monthly fee for debit cards, a person familiar with the bank's strategy says.

The $5 fee, which has triggered a storm of criticism, isn't going away. But under proposed revisions to the plan, "most of our customers won't pay it," according to the person, who spoke on condition of anonymity because the changes haven't been finalized.

Bank of America initially had said it would waive the fee only if a customer had a BofA mortgage or $20,000 in accounts at the bank and its Merrill Lynch brokerage.

It's now planning on lowering the minimum balance requirement significantly, although the final figure hasn't been set. Customers also would be able to dodge the charge by using BofA credit cards or making certain direct deposits.

The bank is going to start charging the debit card fee at a yet-to-be-determined time next year.

RELATED:

Chase opts out of debit-card fee

Citibank is next with a new banking fee

Survey: Debit card users may switch banks over fee

--E. Scott Reckard

Photo credit: Lucas Jackson / Reuters

Chase opts out of debit-card fee

Another bank seems to have figured out what Bank of America Corp. has found out: Charging for use of debit cards could chase customers away.

JPMorgan Chase & Co., which for eight months has been dinging its Georgia and northern Wisconsin customers $3 a month for using debit cards, said Friday it has decided to end the test next month and won't impose the fee anywhere.

There was no official announcement, but a person who had been briefed on the matter said the bank's customers preferred a program it calls Chase Total Checking.

That's a package that charges checking customers $12 a month ($10 monthly in California, Oregon and Washington) but waives the fee if they have at least $500 direct-deposited each month, or keep at least $1,500 in the account, or have a total of $5,000 in linked Chase accounts.

A host of critics including President Obama have attacked BofA's plan to start charging account holders $5 a month if they use their debit cards to make purchases (ATM transactions are free).

Citibank has said its tests, like Chase's, showed consumers really hate the idea of debit card fees. It has raised its fee for a basic checking account but has said it won't impose a debit fee.

US Bank also has said it has no plans for such a fee, although Wells Fargo has begun conducting its own tests of a $3 monthly charge and some regional banks like SunTrust, a big presence in the Southeast, have started charging a fee similar to BofA's.

Bank customers across the country have expressed "outrage" over the BofA fee, according to Norma Garcia, who heads up a financial-services program for Consumers Union, the advocacy arm of Consumer Reports.

"It's time for Bank of America to listen to its customers who are saying loud and clear: drop the fee or we'll drop you," Garcia said in a statement. "All banks that are considering debit card fees should ditch those plans."

BofA Chief Executive Brian T. Moynihan said this week that he’s “incensed” by public criticism of his company and is pushing back by reminding local leaders of its contributions to their economies.

RELATED:

Citibank imposes higher checking charges -- but no debit card fee

Debit cards poised to get much costlier

Survey: Debit cards users may switch banks over new fees     

--E. Scott Reckard

Photo credit: Elaine Thompson / Associated Press

Bank of America ramps up foreclosure proceedings

Bank of America Corp. is stepping up its foreclosure activity in states where a court order is not needed to take back a home. Bank of America is the nation’s largest mortgage servicer, and other big banks could follow suit, according to analysts.

“Nobody really wants to be a leader in foreclosed properties but, for better or worse, that is what Bank of America is,” said Guy Cecala, publisher of Inside Mortgage Finance Publications.

Bank of America has improved its repossession practices and has increased foreclosures in the so-called non-judicial states, such as California and Nevada, where a court order isn’t required to take back a home, spokeswoman Jumana Bauwens said. Such a pickup is necessary if the real estate market is to get over its long slump, she added.

“Strong gains like that from July to August demonstrate our progress,” Bauwens said. “We are seeing continued improvements in foreclosure volumes in many areas of the country, and that is a potential harbinger for housing market recovery.”

In California, Bank of America ratcheted up the number of notices of default on homeowners by 182.4% from July to August, according to a preliminary analysis by San Diego-based research firm DataQuick. The bank filed new foreclosure proceedings on 6,478 homes in the Golden State.

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New-home slump keeping door shut on U.S. recovery

White House forecasts high unemployment through 2012

BofA, Chase must do more to help troubled homeowners, Obama administration says 

-- Alejandro Lazo

Twitter.com/AlejandroLazo

Photo: Members of the Home Defenders League rally in front of a Bank of America branch in San Jose.  Source: Associated Press

Feds: BofA improperly fired employee who exposed Countrywide fraud

 
Bank of America Corp. wrongly fired an internal investigator who exposed "widespread and pervasive wire, mail and bank fraud"  at Countrywide Financial Corp., according to the U.S. Labor Department.

Finding that the employee was protected by whistle-blower law, the department's Occupational Safety and Health Administration ordered BofA to reinstate and pay the employee $930,000, including back wages, interest, compensatory damages and attorney fees.

Bank of America acquired Calabasas-based Countrywide in July 2008 and fired the whistle-blower shortly thereafter, OSHA said in a news release Wednesday.

In a statement, Bank of America said it would challenge the order. "The bank’s actions to dismiss were solely based on issues with the employee’s management style and in no way related to the employee’s complaints and the allegations made in the complaint," it said.

The federal agency didn't name the employee. It identified the worker only as an L.A.-area person who led internal investigations into Countrywide employees.

"It's clear from our investigation that Bank of America used illegal retaliatory tactics against this employee," OSHA Assistant Secretary David Michaels said in the news release.

"This employee showed great courage reporting potential fraud and standing up for the rights of other employees to do the same."

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Jury awards fired Countrywide executive $3.8 million

U.S. drops criminal probe of former Countrywide chief Angelo Mozilo

Investors wonder whether BofA cost-cutting plan is enough

 --E. Scott Reckard

Photo: Countrywide Financial co-founder Angelo Mozilo, center. Credit: Irfan Khan/Los Angeles Times

 

Countrywide bankruptcy? Bank of America keeps its options open

Is bankruptcy possible for Countrywide Financial Corp., the Calabasas-based home lender whose acquisition has cost Bank of America Corp. tens of billions of dollars?

BofA Chief Executive Brian Moynihan didn't rule that out Monday in addressing an analyst conference in New York, though he didn't elaborate on the chance of such an extreme action either.

Moynihan instead focused on Phase 1 of his cost-cutting plan for the bank, which other corporate officials said Monday would eliminate about 30,000 jobs from a base of about 287,000.

The effort will shave $5 billion a year in expenses from the bank's consumer businesses and support operations when it is fully implemented in 2013, Moynihan said. The bank's shares rose 5 cents to $7.03 in early trading Monday.

Repeating his mantra, Moynihan said acquisitions by his predecessor, Ken Lewis, had burdened the bank with overlapping systems, "tens of millions of square feet we don't use," and businesses not focused on its core customers.

In one example of the divestitures he is making, Moynihan described the correspondent mortgage business, which buys loans from smaller lenders, as "simply enabling a competitor, and at high cost." 

The correspondent lending business was part of Countrywide, which Lewis acquired in 2008. Countrywide, once the No. 1 mortgage lender, had tried to dominate the market in high-risk loans along with more conventional products.  

Of six main Bank of America business lines, mortgages are the only one still losing money on operations. Moynihan said settling lawsuits related to investor losses on Countrywide's mortgage-backed securities would take years.

Asked if he would consider putting Countrywide into bankruptcy, he replied, "We look at all our options."

The $5 billion represents 18% of the current $27 billion a year in annual operating costs for the consumer businesses and support operations. Phase 2 of Moynihan's "New BAC" streamlining will focus on operations that handle large businesses and institutional clients such as pension funds.

Those operations have about $28 billion in operating costs. Moynihan said it wouldn't be possible to cut costs as much there as in the consumer and support areas because there's less physical infrastructure to go after and he's not changing the compensation for the high-priced bankers who work in those segments.

"It will not be as fruitful on a dollars-per-square-inch basis,"  he said, "but it will be fruitful."

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Bank of America to cut at least 40,000 jobs

BofA CEO Brian Moynihan ousts two top execs

Moynihan on trying to tame the Mozilo monster

-- E. Scott Reckard

Photo: Bank of America Chief Executive Brian Moynihan's cost-cutting plan will shave $5 billion a year in expenses from the bank's consumer businesses and support operations when it is fully implemented in 2013. Credit: Chuck Burton / Associated Press

Consumer Confidential: BofA layoffs, wiener war cease-fire

Here's your frosted-flakes Friday roundup of consumer news from around the Web:

--And the Bad Timing Award goes to Bank of America, which, a day after President Obama called for more job creation, is reportedly on the verge of laying off about 40,000 workers. The Wall Street Journal says officials at the bank have discussed cutting as much as 14% of the company's workforce. BofA has already cut at least 6,000 jobs this year as part of its reorganization under CEO Brian Moynihan, who has been in the top spot since last year. Moynihan earlier this week unveiled a shakeup in the bank's management ranks. BofA, still struggling under the weight of toxic mortgage loans, says the moves are part of "delayering and simplifying" operations. It has more employees than most of its major competitors, and top executives have stressed the need to eliminate redundancies resulting from past acquisitions.

--The wiener war is over. A two-year battle pitted Sara Lee's Ball Park and Kraft Foods' Oscar Mayer hot dogs. The companies, America's largest hot dog makers, both alleged that the other exaggerated claims about being No. 1. The two Chicago-area food giants announced that they have settled out of court -- less than a month after their civil trial began. The terms of their frankfurter cease-fire are confidential, though a Sara Lee spokesman says neither side paid money to the other, and that neither is changing its marketing practices. So it'll be up to us to decide which wiener is top dog.

-- David Lazarus

Photo: Bank of America is reportedly showing workers the door. Credit: Andrew Gombert / EPA

 

BofA, Chase must do more to help troubled homeowners, Obama administration says

 
Bank of America and J.P. Morgan Chase Bank are in substantial need of improvement when it comes to helping troubled borrowers modify their mortgages, the government said Thursday.

The Obama administration said the two banks were in need of substantial improvement, judging them unworthy of receiving financial incentives through its signature foreclosure relief program until they improve their practices. The banks will be denied financial incentives for completing modifications until they improve.

Wells Fargo and Ocwen Loan Servicing had previously been on the list of banks that needed "substantial" improvement. Those two banks are now only in need of moderate improvement, according to the administration, as were American Home Mortgage Servicing; CitiMortgage; and Select Portfolio Servicing. The banks that were in need of minor improvement included GMAC Mortgage; Litton Loan Servicing and OneWest Bank.

The assessments of the 10 largest servicers in the program were intended to compel the nation's biggest mortgage servicers to improve their practices in the program, officials said.

The mortgage modification program has long been criticized as ineffective and falling short of its goal of helping 3 million to 4 million borrowers escape foreclosure by December 2012.

A total of 675,447 active permanent modifications through the Obama administration's program existed at the end of July, up 3% from the previous month.

 

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-- Alejandro Lazo

Twitter: @AlejandroLazo

Photo: A representative from Bank of America meets with a homeowner to discuss mortgage modifications at a workshop in New York City  this week. Credit: Spencer Platt/Getty Images

BofA to sell or close another mortgage arm, putting jobs at risk

Bank of America Corp. has put another giant piece of the Countrywide mortgage empire on the auction block -- the correspondent lending arm, which buys closed home loans from mortgage bankers, commercial banks and other loan originators.

A spokesman said Wednesday that the Charlotte, N.C., bank is in serious talks with a buyer for the correspondent business. But if it can't strike a deal with that buyer or find another, Bank of America would shut down the business, jeopardizing 1,400 jobs.

Of those, about half are in Southern California, spokeswoman Jumana Bauwens said -- 450 in Westlake Village and 250 in Thousand Oaks.

From  a statement provided by Bauwens on Wednesday:

We intend to sell the correspondent mortgage lending division or, if a suitable deal is not identified, we will consider other options, including winding down the correspondent lending business in an orderly manner.  At this time, our correspondent lending operations continue business as usual. 

Bank of America is currently the second-largest player in the correspondent market, with 23% of the business, while No. 1 Wells Fargo & Co. has a 26.2% share, said Guy Cecala, publisher of Inside Mortgage Finance.

Of Bank of America's total $40.4 billion in mortgage loans in the second quarter, more than half -- $21.8 billion -- was generated through the correspondent channel.

Bank of America has been shedding businesses it considers nonessential as CEO Brian Moynihan tries to raise capital and focus the company, the nation's largest retail bank, on selling multiple products to its core customers. 

Barbara DeSoer, who heads up the home-lending business, decided that borrowers who obtain loans from other originators do not fit in that category, BofA mortgage spokesman Dan Frahm said. The bank generally provides customer service to borrowers as part of its deals with the correspondent lenders who make the loans and then sell them to BofA.

"We want to be in the direct-to-consumer business," Frahm said.  "These are customers who elected to finance their mortgages using a brand other than Bank of America."

When Bank of America in 2008 acquired Countrywide Financial Corp., then the nation's largest mortgage lender, the stated aim was to take advantage of the superior systems the Calabasas company was said to have developed for all aspects of the home lending business, including correspondent lending.

But after recording billions of dollars of losses related to Countrywide, Bank of America has wound up selling or shutting down many mortgage operations.

The bank previously exited wholesale mortgage lending, which is making loans through brokers, and the reverse mortgage business, which allows older people to remain in their homes while drawing down the home equity to live on.

It also sold Balboa Insurance, a legacy Countrywide unit. Balboa provides insurance policies that are forced upon homeowners who let their own fire insurance lapse, often because they are headed for foreclosure.

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BofA gets 5 billion more reasons to regret acquiring Countrywide

BofA's legal woes from Countrywide worse than expected 

Lender buy proves costly for Bank of America 

Bank of America agrees to write down California mortgage principal

-- E. Scott Reckard

Photo: Home Defenders League activists rally in San Jose. Credit: Paul Sakuma/Associated Press

 

 

 

How big is your bank? Chase, Bank of America duel for No. 1 slot

 
SNL Financial has compiled a list of the 50 biggest U.S. banks at the end of the second quarter, which shows Bank of America Corp. barely edging out JPMorgan Chase & Co. as the No. 1 U.S. financial institution as measured by assets.

Assets are the loans, securities and other holdings that are supposed to make money for banks -- a category that unfortunately for the banks and the economy has included an awful lot of toxic money-losers these past few years.

As of June 30, BofA had a little more than $2.25 trillion in assets and Chase just under $2.25 trillion, SNL Financial said in a news release Monday. Citigroup Inc. was third with $1.96 trillion. Wells Fargo & Co., the only California-based company near the top, was in fourth with $1.26 trillion.

Chase led in deposits, however, with $1.05 trillion to BofA's $1.04 trillion.

Other California banks on the list included UnionBanCal Corp., a subsidiary of Japan's Mitsubushi UFJ Financial Group Inc., in 22nd place with $80.1 billion in assets; and BancWest Corp., owned by France's BNP Paribas, in 24th place with $74.3 billion in assets. Like Wells, the parents of Union Bank and Bank of the West are based in San Francisco.

Southern California institutions, well down in not-too-big-to-fail territory, include No. 38 OneWest Bank (Pasadena, $26.4 billion in assets); No. 43 City National Corp. (Los Angeles, $22.5 billion in assets); and No. 45 East West Bancorp (Pasadena, $21.9 billion in assets).

Northern California's First Republic Bank (No. 42, $23.8 billion in assets) and Silicon Valley Bank parent SVB Financial Group (No. 50, $19.4 billion in assets) popped up on the list as well.

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Chase exec tours with pep rally to dispel financial fears

Bank chiefs seek to reassure investors

Federal Reserve aided all types of California banks during financial crisis

--E. Scott Reckard

Photo: JPMorgan Chase Chairman Jamie Dimon, right, during recent West Coast bus tour, presides over a bank that is No. 1 in deposits and No. 2 in assets. Credit: Los Angeles Times / Gary Friedman

 

Risks, Rescues and Remorse

Warren Buffett rode to the rescue of Bank of America today, as he did for Goldman Sachs in the dark days of September 2008.

FLOYD NORRIS

Notions on high and low finance.

B of A will pay less to be saved, but that can be explained by the fact there is less panic to contend with this time. This time the rumors were that the bank needed to raise capital; back then, the rumors were that Goldman was the next Lehman Brothers.

Notions on high and low finance.

The terms of the two deals are similar. Berkshire Hathaway, Mr. Buffett’s company, invests $5 billion in straight preferred stock, and gets a warrant allowing him to invest another $5 billion in common stock at a set price. The preferred stock is perpetual, but the company can buy it back at a premium whenever it wishes to do so.

At Goldman he got a 10 percent coupon on the preferred, and it would cost Goldman a 10 percent penalty to buy it back. At B of A, he gets 6 percent coupon and a 5 percent premium for a buyback.

The warrants are different, and reflect that B of A was in a better position. B of A stock closed on Wednesday at $6.99. The warrants are at $7.142857. So at least B of A gets a little premium to market price at the time of the deal if the warrants are exercised.

Goldman shares were at $125.05 when the deal with Mr. Buffett was announced. His warrant was at $115 per share. He got a discount exercise price.

How has Mr. Buffett done at Goldman? Fine on the preferred. Not so fine on the warrant. Goldman bought the preferred back in April. Add in the interest and the repurchase premium, and Berkshire made $1.75 billion over two and a half years. Anything it collects on the warrants will be gravy, but at the moment there is none available. Goldman shares trade around $110.

The warrants had five-year terms, so Berkshire has until October 2013 to exercise them.

Mr. Buffett did do a little better on one term of the warrants at B of A. They are 10-year warrants, twice as long as at Goldman. So he has a lot longer time for the share price to work out.

When Mr. Buffett made his first Wall Street rescue, of Salomon Brothers amid a scandal two decades ago, he was reported to have called his investment a Treasury bill with a lottery ticket attached. He would get a solid return if the company merely survived, and a great one if it prospered.

Seen that way, this is not nearly as risky as a bet as a purchase of B of A stock would be. That may be the essential point that led the early euphoria to fade. B of A stock leaped to $8.80 soon after the opening this morning, but was under $8 by 11 a.m.

It is a sign of both the prestige of Mr. Buffett and of the fragility of markets that either of these deals were available to him.

Of course, there are risks in being a rescuer. A rescuer needs to use cash it can afford to lose, and it needs to have the judgment and courage to refuse to throw good money after bad if things do not go according to plan.

In August 2007, Countrywide Financial, a major home lender, was bailed out by B of A, which invested $2 billion in convertible preferred stock. It was convertible at a discount to current market value. B of A stock rose on the news.

A few months later, with Countrywide in deeper trouble, B of A agreed to take over the whole company for stock then worth $4 billion. The deal closed July 1, 2008. By then B of A was trading for about half what it was worth when it first invested in Countrywide. It had a lot further to fall.

It was one of the worst mergers ever. B of A has yet to reach the bottom of the sinkhole of legal liability created by Countrywide’s reckless lending policies.

But for that rescue by Bank of America, this one — of Bank of America — would not be necessary.

Battered bank stocks rebound

Banks stocks, badly beaten down by fears of a double-dip recession, worries about continued mortgage losses and the debt crises in Europe and the United States, rose sharply higher Tuesday as investors decided a buying opportunity was at hand.

The BKX index of 24 diverse bank stocks was up more than 7%, with some of the largest and most hammered banks significantly higher.

Retail giant Bank of America Corp., which has been hit particularly hard by fears that it can't get a handle on its mortgage troubles, was up $1.09, or 16.7%, at $7.60. The stock had plunged by 20% on Monday in the highly volatile market.

Wells Fargo & Co., also highly exposed to consumer lending, rose $1.85, or 8.1%, to $24.78. Citigroup Inc., which has huge exposure to foreign markets, jumped $3.87 to $31.82, a 13.8% gain, as Chief Executive Vikram Pandit said his bank, extensively restructured after the financial crisis, has "unparalleled resources" to withstand the current storms.

Shares of JPMorgan Chase & Co., regarded as among the strongest banks, rose $2.34, or 6.9%, to $36.40.

The bank stocks jumped early in the day but backed off after Standard & Poors, which helped trigger a market sell-off four days earlier by downgrading the long-term credit rating of U.S. Treasury debt, expressed concerns that bank profits will be depressed by the slow economy, sovereign debt problems and the continuing mortgage and housing fiasco.

The bank shares then resumed their climb after the Federal Reserve, expressing concerns about the weakening economy, said it probably would hold its benchmark interest rate near zero for another two years.

Wall Street Roundup: Bloody Monday. Buffett vs. Gross.

Gold: Trading now at $1,702 per ounce, up 3.2% from Friday. Dow Jones industrial average: Trading now at 11,128.10, down 2.7 from Friday.

Bloody Monday. Stocks have fallen fast in early trading on Monday morning as the markets absorb Standard & Poor's Friday-evening announcement that it is downgrading the United States' credit.

Buffett vs. Gross. Investing giant Bill Gross of PIMCO praised S&P for its move over the weekend, while Warren Buffett took the opposite position and said the U.S. deserves a AAAA rating.

AIG vs. BofA. American International Group is the latest financial player to sue Bank of America, blaming the bank for selling it low-quality mortgage securities before the financial crisis.

Remember the flash crash? Regulators are sending subpoenas to high-frequency trading firms as the authorities probe what role the firms played in recent market instability.

-- Nathaniel Popper in New York

Photo credit: Stan Honda /Getty Images

Bank of America shares tumble again

News of another huge mortgage lawsuit targeting Bank of America Corp., and of a hedge-fund investor dumping BofA shares, sent the bank's stock tumbling Monday. 
 
Bank of America shares fell $1.18, or 14%, to $6.99 in midday trading Monday. That's down more than 50% from their 52-week high of $15.31.

The decline followed reports that the giant insurer American International Group, which was bailed out by the government during the financial crisis, would sue BofA for $10 billion in losses on mortgage securities, and that hedge-fund investor David Teppen had sold his stake in BofA.

The Charlotte, N.C.-based bank took $20 billion in charges during the second quarter to deal with lawsuits and other problems stemming from its 2008 acquisition of Calabasas-based Countrywide Financial Corp., which had become the largest home lender by trying to dominate every high-risk mortgage category.

There's a growing list of mortgage-securities holders who contend the loans backing the bonds were misrepresented and, as independent bank analyst Nancy Bush told The Times last month, "The Street believes these types of charges are just going to keep dinging them."

Teppen, whose Appaloosa Management had taken big positions in battered bank shares, apparently agreed, reportedly selling all his 17 million shares of Bank of America as well as those in San Francisco's Wells Fargo & Co.

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-- E. Scott Reckard

Photo credit: Lucas Jackson / Reuters

Number of borrowers winning foreclosure relief inches up in June

The number of troubled borrowers gaining permanent mortgage relief from the administration's main foreclosure assistance program inched up just 3.7% from May to June, the government said Friday.

The Home Affordable Modification Program was launched in early 2009 with the aim of helping 3 million to 4 million homeowners avoid foreclosure through 2012. But only 657,044 people had qualified for a permanent mortgage modification through June 30, according to government statistics.

The program provides cash incentives for lenders to reduce monthly payments through a variety of means. In June, the Obama administration punished three of the nation's largest banks -- Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. -- judging their performance in the program as in need of "substantial improvement" and unworthy of receiving financial incentives.

The move was the first time that the administration had taken any major punitive action against the banks, but advocates decried the move as too little too late. Another assessment of mortgage servicer performance in the program is due in September.

The Los Angeles metro area has had the most people receiving permanent modifications through the program, with 46,860 people having had their loans modified through June. The Riverside-San Bernardino metro area had the third largest number of people receiving modifications through the program, with 40,678 through June.

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-- Alejandro Lazo

Twitter: @AlejandroLazo

Photo: Thousands of homeowners gathered at the Shrine Auditorium in Los Angeles June 2 for help with loan modifications as part of the "Save the Dream" event put on by the Neighborhood Assistance Corp. of America

Credit: Nick Ut / Associated Press

Bank of America agrees to write down California mortgage principal

 

Bank of America has begun writing down principal on the mortgages of some troubled borrowers in California through a state program intended to help people facing foreclosure.

The bank has signed on to the principal reduction component of the Keep Your Home California program, which uses federal funds reserved for the 2008 rescue of the financial system to help homeowners behind on their mortgages. For full details of the program, click here.

BofA is the largest of the nation's major banks to join the program, which was launched this year with $2 billion in federal funds. The California Housing Finance Agency, which runs the program, said BofA has been writing down principal on some mortgages as part of a pilot program since February and is now moving into full participation.

“California has been particularly hard hit by reductions in property values,” Rebecca Mairone, national mortgage outreach executive for BofA, said in a statement.

The bank services more than 2.2 million home loans in California, according to the housing agency. Consumer advocates criticized the lack of major mortgage servicer participation when the program was launched this year. Officials said they hope the program will encourage other major financial institutions to join.

“We’re excited to have Bank America on board for one more of the Keep Your Home California programs,” Claudia Cappio, executive director for the agency, said. “We believe principal reduction can be an appropriate tool for helping qualified homeowners obtain an affordable and sustainable modification. We continue to work with other mortgage servicers to offer this to their customers.”

The principal reduction program is aimed at helping cash-strapped Californians who are "underwater" on their mortgages -- those owing more on their properties than what those homes are worth. Those borrowers who qualify could be eligible for a total principal reduction of up to $100,000 through the program.

The program allows for up to $50,000 in aid to troubled borrowers. Banks participating in the principal reduction component are required to match that aid. Mortgages owned or guaranteed by Fannie Mae or Freddie Mac are among those that are not eligible for principal reduction.

Keep Your Home California has several other programs, including one that helps people pay their mortgages as well as provides moving assistance to certain borrowers who lose their homes to foreclose. State officials hope to fend off foreclosure for about 95,000 borrowers and provide moving assistance to about 6,500 people who do lose their homes.

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-- Alejandro Lazo

Twitter: @AlejandroLazo

Photo: Home Defenders League activists rally in San Jose, Calif.

Credit: Paul Sakuma/Associated Press