The mortgage stupidity era is over, while demands for repayment of soured loans keeps mounting. How bad was Countrywide Mortgage, now owned by Bank of America? The bank made a guess, but those figures don’t add up. Now the bank says the figures might be worse:
New demands for refunds on soured loans from the two U.S.-owned mortgage firms are coming “in numbers that were not expected based on historical experience,” the company said in its Aug. 4 quarterly report to regulators.
The filing signals that the $30 billion of expenses booked by Brian T. Moynihan since he became chief executive officer still may not be enough to clean up the faulty mortgages inherited from former CEO Kenneth D. Lewis. The Charlotte, North Carolina-based firm told investors in June that actions taken during the second quarter probably would cover any further buybacks unless Fannie Mae and Freddie changed their stance.
“Yet again, another line in the sand from Bank of America turns out to be fungible,” said Tony Plath, a professor of finance at the University of North Carolina in Charlotte. “I don’t think it’s anything nefarious, it’s just that they don’t know what the magnitude of losses in that portfolio will be — and until they do, none of their numbers have credibility.”