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Bank of America Gaming Government Loan Guarantees
I have long suspected that it was only a matter of time before banks began to adjust their Collection efforts to reflect Government Guarantees on their loan portfolios.
Simply put, imagine you are a bank with $100 billion in loans. Of this, $20 Billion is guaranteed by the government, $80 billion is your own money. If you managed the collection organization responsible for servicing this debt wouldn't you be just a wee bit tempted to make sure that your $80 billion was getting the priority?
The table below details the past 12 quarters of Total Loans for Bank of America along with the portion that is Noncurrent:
The Noncurrent percentage has jumped from 5.30% in Q3 to 6.75% in Q4. Quarter on Quarter there is another $12.44 Billion in Noncurrent loans.
The next table details the same 12 quarters and reviews what portion of the Noncurrent loans are guaranteed by the Government (er, you and me the taxpayer):
Bank of America has had a massive jump in the Noncurrent loans that are Governement Guaranteed. The Quarter on Quarter jump is... wait for it... $11.40 Billion.
So, magically, the incremental $12.44 Billion that has become Noncurrent Quarter on Quarter at Bank of America has a guarantee on $11.40 Billion. Nearly 92% of the jump in their Noncurrent loans are covered by us, the taxpayer.
This is no consipiracy theory discussion - these are cold hard facts supporting what any reasonable actor would do in the situtation. If the government is going to cover my losses on a portion of my loan portfolio I can damn well guarantee you I'd be moving my best collectors to the portfolio I'm responsible for. The government can have my new hires, my undesirables, my slow workers, etc...
I highly doubt that we'll ever hear about this, but this is yet another massive shift from the taxpayer to the banks.
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My guess is that it is Countrywide. Just a guess though.
Not my area of expertise, but maybe BofA gave them the junk right from the beginning? I'm guessing that's what happened. What the gov should have done is requested a sampling of randomly selected loans for their guarantee. However, it doesn't look like this was a requirement and thus maybe BofA hand picked from the bottom of the barrel? Either way; don't do business with this bank.
The premise of your article might be wrong - ie. that government guaranteed loans are not being serviced as well as the banks own loans. As I understand, Fannie and Freddie Mac are now guaranteeing mortagage refinancing (someone needs to look into this more). That would mean that whereas underwater loans couldn't be refinanced, banks are now refinancing them with gov. guarantees. Therfore it could be that more loans are falling into the gov. guarantee pool AND these are more likely now to default. In other words, the bankers are shifting their toxic crap onto the public balance sheet via Fannie and Freddie that continue to bleen red ink. Is it any wonder that the GSE's continue to have massive losses while the banks keep reporting their Enronesque profits?
Well, to be sure, I suspected that this was the case all along. I think there can be little doubt about it.
POS bank receiving tax pay payer money to buy taxpayer backed loans @ 60,50,40 cents on the dollar then making it almost impossible to qualify under HAMP rules and have loans on books at full price then to cash them in when forclosed on for 100 cents on dollar - great work , if you can get it. This is happening to me right now, had a TB & W FHA loan which was "bought " by BoA, 3 payments behind, lost job in November 09, DTI below 31% (don't have car note or credit cards etc.) and all based on previous earnings so don't qualify. F***ing blood sucking scum banks and Fed. Oh and spending hours on phone being pushed from one dept to another & to India and back again, then everytime I call no one knows anything despite being told " i'll make a note of that". Why does someone in India need/have my Social Security number? this should be illegal. Would it not of been cheaper, easier and quicker for Fed to pay banks interest only on loans when some one lost their job? as in UK.
Know a case where BoA tried to force a foreclosure on a mortgage that was current and never late because of a technicality. THIS PIECE OF SHIT COMPANY SHOULD BE BURNED TO THE GROUND.
If I were an employee there then when the chit hits the fan use the back door to get home.
Now what am I, as a taxpayer, getting for all the goddamn fucking money I've let these crooks steal from me?
Time for somebody to pay. Not me. And not money. Time to take back the country, and anyone standing in the way will be removed. Forcefully.
Just another reason to get the assholes in Washington out of our lives, and reign in their control over us. They're supposed to represent us, not rule us or confiscate our "stuff" to give to people who'll keep them in office or give them goodies.
This isn't 1/10th BofA's problem. Anyone would do the same thing. I'd just suggest that next time we consider how we craft our gazillion dollars in bank backstops a little more carefully, or better still, dont backstop them at all. Plus, theres also the posibility that BofA underwrote "their" loans with tougher standards than those sold to FNM and FRE. No fact there, but once again, its just possible BAC acted with their self interest in mind.
Stringing BOA along on a promotional rate till paid. 1 thing i did notice is they no longer email alerts for due or paid status.
A real real good friend of mine.... works for BAC. Let me tell you a few things about this company.
The grace period for mortgages goes to the 16th, but the collection company starts in on the 3rd of the month with the nasty letters and calls.
Homeowners insurance renewals and information mysteriously goes missing on a regular basis, so they slap lender placed insurance (BAC's insurance co. of course...Balboa) on the account, and then refuse to refund the entire amount once the missing info is finally discovered a month or more down the line. This completely jacks up payments and escrow accounts too by the way, good times.
If the bank draws a double payment by accident or customer mistake.... Payment reversals take weeks, and even if it's BAC's fault the require you to fax in back up when they know well and good it cleared the bank.
Oh I could go on...
You want the truth?
BAC is terrible too their employees, their customers, their shareholders, and to the tax paying citizens in their country of origin. By terrible I mean rapes them btw.
(This is all from a good friend of mine, just so you know. I would never say such things about almighty BAC.)
Of course, this is most likely all of the TBTF banks.
When are you people going to wise up and move your money into physical "hold in your hand" assets (bills, bullets, gold), take your money out of fraudulent investment vehicles and markets, and refuse to pay tributary taxes to a government and parties whose actions you don't support? Hmmmm?
Face it. We Americans are total pusses. Weak man. This is the country of go F yourself? Whatever. We deserve what we get. This country sucks. That's right, YOU SUCK. I SUCK. Can we get off our knees and do something now that the truth is behind us?
We have until November to stop SUCKING. If we can't stop SUCKING then WTF... I'm leaving and y'all can clean this phucking mess up yourselves.
America's housing market implosion was the epicenter of the Great Recession. It's hardly surprising that the federal government directed enormous resources at the market. Besides bailing out vulnerable banks, the federal government nationalized mortgage behemoths Fannie Mae and Freddie Mac, opened the lending spigot at the Federal Housing Administration (FHA), passed a first-time home buyers' tax credit, and established a mortgage modification program for troubled homeowners. The Federal Reserve embarked on a $1.25 trillion purchase of mortgage-backed securities in an effort to engineer lower mortgage rates.
The Herculean efforts may be understandable. But they were a mistake in the early months of the downturn—and now stand as a public policy blunder in the early months of a recovery. That's a harsh judgment, but it's way past the time for ending taxpayer support of the housing market.
These policies are geared toward propping up home prices, the definition of a perverse public policy. Artificially holding prices at above-market levels harms new potential buyers, from young adults starting their own households to immigrants putting down stakes in the American Dream. The subsidies wrongly delay the inevitable home market price adjustment to excess supply in many markets across the country.
"I don't see anything being gained by holding housing prices higher than the market rate," says Dean Baker, economist and co-director of the liberal Center for Economic & Policy Research in Washington. "It is difficult to see why the government would want to pursue policies that would encourage people to pay too much for homes."
Wow. Mr Anonymous #247417, you are an eloquent writer. Your prose reminds me of Chris Farrell's style. You should contribute more.
"The subsidies wrongly delay the inevitable home market price adjustment to excess supply in many markets across the country".
I want to buy a house after they achieve fair market value. Nobody knows what fair market value is because of the "perverse public policy".
Agree, but are you 100% certain the real implosion has already occurred ?
Harvey, the answer, or close to it, is answered in the rest of the original article:
http://www.businessweek.com/investor/content/feb2010/pi20100226_589467.h...
Well, if someone handed you a load of money to do it, wouldn't you? Survival of self comes before all others.
http://www.cesidebtsolutions.org
Terrible housing news for Florida - NASA layoffs..
http://www.floridatoday.com/article/20100226/NEWS0204/2260321/23-000-now...
BofA has always shifted problems to the government. My father worked at the main progenitor of the bank. Once, after a meeting to discuss their purchase of a huge failed competitor which was aided by a huge transfer of losses to the government, the largest such operation to that date, he said one of the executives in charge of it told him, "If you stand in front of the government long enough with your hand out, eventually they'll fill it." And that appears to have been their business strategy since then...
In the City of Orange, CA, there is a famous traffic circle in downtown. Once a thriving small town business area, it still is except now it is all (almost) antique shops. In keeping with the current flavor of things are old painted signs on the side of century old buildings. One is "Bank of Italy". They've been doing this crap for a long time!
Know exactly what you are talking about.
Sounds good, but BofA shouldn't assume the guarantees are money good, because the GSE's are starting to kick the defaults back to the lenders when they find they are crap, specifically:
if there is (a) a material breach of warranty by the mortgage seller or servicer, (b) a material defect in documentation as to such mortgage or (c) a failure by a seller or servicer to comply with any requirements or terms set forth in the seller guide and/or purchase documents.
Desperate times call for desperate measures, like doing what should've been done in the first place.
because the GSE's are starting to kick the defaults back to the lenders when they find they are crap, specifically:
This is correct and I would like to read more about it as it has not caught much attention. The read that I have so far, and please don't count on this, is that the GSEs are getting more aggressive in this regard so that they don't keep taking the hits....
Careful with those percentages, matey. The jump in non-current "guv'ment" loans was not 92%
It was 760%.
If only us non-vampire-squids could get returns like that.
What he was saying was that 92% of the total jump in delinquencies for the quarter consisted of government-backed loans, and the remaining 8% was from their own portfolio.
Could it be that these were all the loans coming out of the HAMP program that didn't qualify, or that people heard about HAMP and went into default on purpose in order to get a modification?
What else is new? of course they do. let's go back to 2 years ago, all these junk loans were in the banks on their off-balance sheets accounts, deeming these banks insolvent. Now, through various programs from the Fed and treasury, the toxic stuff unloaded to the fed, and the banks look sexy again. It's said to be the largest wealth transfer from the taxpayers to the banks ever. all of these are in the name of saving "the financial system". It is utter corruption.
by the way, have you seen our leaders ever talking about the corruption to foreign countries since then?
"It is utter corruption".
Yeah, corruption are us. WTF is anybody going to do about it?
Fuck BOA, and fuck those that bank there and keep this avenue of of fraud/corporate welfare wagon open.
Thanks for sharing. Passing it around.
Well, to be fair, what would you have them do? They have backing on these loans and their portfolio stuff is vulnerable. Of course they're breaking legs on their portfolio stuff. I am glad you pointed it out, though. Maybe we can get some media outlet to look at your post. I'll tweet it out. We should all do the same.
Here's a bit.ly link for this post - http://bit.ly/dfiFHX
Given there are about 130 million people in the US who are employed in the private sector, that's another cool Benjamin out of every worker's pocket. I say we all send B of A an invoice for $100 for not doing their freaking job.