The Bank of America has not been having a good time. The recession pushed the bank down right down to its knees and its take a long time to get back again. But now it’s been hit hard with several whopping lawsuits that threaten to dent its bottom line and its reputation in the long run.
Lawsuits Galore In 2009-2010
In the shaky economy, the Bank of America had foreclosed on several homes all over the US due to non payment of dues. According to homeowners and recent disclosures, these foreclosures could have been illegal and carried out due to an automatic rubber stamping process that resulted in a huge subprime mortgage problem that resulted in a housing crash. The Attorney General has now filed suit against the Bank of America, JP Morgan Chase, Citi, Ally Financial and Wells Fargo, as well as the MERS corp alleging that they indulged in deceptive trade practices and fake documentation to push the foreclosures through. At present apart from the above mentioned banks, seventeen major banks are facing a lawsuit over the mortgage issues and the subsequent losses that were experienced by lending companies. A bank of america settlement might be possible but it still has to be negotiated through.h In a separate case, the US BANCORP association filed suit against the Bank of American stating that the Bank must buy back its present mortgages. They are currently arguing that the loans were made without proper documentation. The Bank of America had acquired Countrywide, a subprime lending giant in 2008 and most of these loans were theirs. The Association states in their suit that as soon as the loans were sold to US BANCORP, the loans started to default at an alarming rate and these loans where all set up by Countrywide. Countrywide cost about $4 billion to purchase but the subsequent losses from its acquisition have hit a mind boggling $30 billion.
A bank of america settlement in the near future as regarding the foreclosures?
A settlement offer of $8.5 billion was made by the Bank of America to cover the approximate $424 billion of Countrywide mortgages that were packaged and mortgage bonds and resold to private investors. This settlement was made with 22 large institutions as a way to limit the losses that could literally sink the bank. However, this seems to have drawn more worms out of the woodwork with many more plaintiffs setting suits against the bank for a variety of reasons. Along with many more plaintiffs, the settlement offer of $8.5 billion has been contested by The Federal Housing Finance Agency and the Federal Deposit Insurance Corporation. The ultimate cost could now be in the hundreds of thousands and this realization has made the Bank of America stock dip sharply by as much as forty percent in 2011.
Another problem that hit the bank quite hard was the intention to set a $5 monthly fee that was applicable on debit-card purchases. By the time the public had objected, the bank had managed to rake in about $4.5 billion in automatically deducted fees. However, a court ruling reversed the rule and the Bank now has to pay back the amount approximating $410 million to settle the cash that was taken from customer accounts.