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Is Brian Moynihan The Latest Entrant In The 10(b)-5 Fraud Club After Misrepresenting Foreclosure Halt Charges?

Tyler Durden's picture





 

While reading Bank of America's 631 page 10K (oh yes, someone will read it cover to cover), the first thing we spotted was the followingL "On February 24, 2011, the company and Brian T. Moynihan, President and Chief Executive Officer, entered into a non−exclusive aircraft time sharing agreement (the “Agreement”), which will permit Mr. Moynihan to lease the company’s aircraft for his use." And just why did Mr. Moynihan not simply get a NetJets timeshare lease instead we wonder? We are confident that the terms of the arrangement will be promptly made public for everyone interested to remove any doubt there is any preferential behind the scenes dealing in allowing the former GC to fly anywhere he chooses on a taxpayer's dime (speaking of, BofA, how is that TLGP repayment coming? Ahead of schedule? Behind?). But far more important than the CEO's private jet arrangements, is the following blurb hidden deep inside the bowels of the paperweight:"our agreements with the GSEs and their first mortgage seller/servicer guides provide for timelines to resolve delinquent loans through workout efforts or liquidation, if necessary. In the fourth quarter of 2010, we recorded an expense of $230 million for compensatory fees that we expect to be assessed by the GSEs as a result of foreclosure delays." Keep that statement in mind as we wonder out loud whether or not the CEO actively lied to investors during the company's November 2010 financials conference, not to mention the bank's Q3 conference call.

On December 1, 2010, during a Senate Banking Hearing he learned the following (source):

DONALD BISENIUS, EXECUTIVE VICE PRESIDENT, FREDDIE MAC:  “...every day, every month I wait to start that foreclosure process costs, and costs a lot.   If you do back of envelope math, as I suggested in my written statement, it's $30 to $40 a day. If we have 300,000 loans sitting in foreclosure, that can start to run into the hundreds of millions of dollars a month from those delays. We have to find a way to remove the confusion, because I understand it is a painful process and a confusing process.”

That estimate actually ties in perfectly with the just released number from the 10K.

Yet here's the rub. Compare the above, with the following statements from Moynihan from last year's Financials Conference (November 16, 2010):

<Q>: I was wondering if you could comment what the foreclosure moratorium is costing Bank of America, on the increased personnel costs and how long do you think those costs will go on for?
 
<A - Brian T. Moynihan, President and Chief Executive Officer>: In terms of the actual, the costs in our mortgage company, we went from about 30,000 people to 50,000 people. The foreclosure piece is actually a small part of that business, the work up to a foreclosure, the collections and modification effort, that's where all the work goes in. So I think Chuck said at earnings, it's $10 million, $20 million a month for a couple, for several months, so it's not a major issue. The cost in the mortgage business, and one of the reasons for our expenses, when you look at them from the outside you say geez, why isn't more coming out here, is we are continuing to build people to do the modifications and collect the delinquent credit, to work the people, with the customers to help them to try to avoid foreclosure and ultimately foreclose, but the actual cost of that particular redo of the 100,000 affidavits and getting that process exactly right has been relatively modest in the context of people working on it.
 
The real cost was going from 5,000 to 10,000 to 15,000 to 20,000 people working on the whole delinquent book. And what will happen is over the next three years, you will see that plateau and come back down. If you look at us from a company producing a couple billion, or $70 billion of mortgage credit a quarter and servicing it when delinquencies are more normalized after we get the pig in the snake and delinquency will come down in the front end, that's a company that needs about 30,000 employees, and we literally have 50,000. So that will take us a few years to complete it.

Um "$10 million a month" versus $230 million a quarter? And this comes from the CEO who should know his company better than the guy from Freddie Mac.

But then compare the comments from the Q3 earnings call:

<Q>: Okay. And could you just sort of step back from – I mean this foreclosure issue – foreclosure moratorium got blown out basically in the last week or so to a lot of other stuff. The fact that REMICs are not valid, that titles are not being conveyed properly in the REMIC process, et cetera, et cetera. Could you just kind of give us your view of whether this is a big deal, not a big deal, not as big a deal as the press has presented, et cetera?

<A>: Here is what I say, is I think when you're going through the issue of people losing their home, Nancy, there could be a lot of obstacles put up in front of that process by people who want to keep their homes and people representing them, and we know that. But that's going on forever, frankly. So I think that on the affidavits that some judges said we want these done right, we went and did them. I'm sure there will be other issues raised. But as we look at the so-called marriage issue is we look at some of the other stuff that's raised, and I think you've seen a lot of people write on this or talk about it.  We don't see the issues that people are worried about, quite frankly. But we're taking them very seriously. We're making sure we're right. But for example, one of the issues was you needed to take title in your own name prior to foreclosure out of marriage, and we've done that. That's been our policy. So there's nuances in how all those things play out. But I think you are right. I think the best way to think about it is – I don't think the technical issues are a big deal. The issue of foreclosure is a big of deal, and the issue is we've got to get on with it, because it will restore the health in the market. I think the overstatement that this is all messed up, it's been going on for a while. We've been ramping up the people, us and the other servicers. They're going to – a big volume of transactions have gone through in this last quarter. It will get bigger over the next quarters. But within three or four quarters, we'll peak and come down the other side in terms of this activity. It will still be elevated. So I think it's a big issue because people are losing their homes. It's not a big issue for the kinds of issues in service.
 
ON THE NUMBER OF LOAN FILES AFFECTED BY THE FORECLOSURE MORATORIUM:

We will move next to site of Nancy Bush with NAB Research, LLC. Your line is open.

<Q>: Good morning. A couple of questions here. Brian, could you just clarify where are you on this foreclosure review? I'm reading the slide here, the moratorium that you had on in the judicial state is now off, but I see at the bottom of this slide, you say we'll not complete a foreclosure sale at this time. So when do we get to that point when you actually start selling foreclosed assets again?
 
<A>: I think we've said – this sort of timed out with the statements that we put out yesterday. I think you should look at those in terms of timing. I thought we said that we'd begin putting affidavits back in the process next week. Then that's a judicial process. Then the judge looks at the papers and takes you through. Then the non-judicial states will take a few more weeks to complete the review. So it begins next week, but It builds back up. There's a basically – if you step back from this, there's 1,000 people working on this. It's 100,000 some in the judicial state. So it's not an amount of work that we're not used to getting done. Then we'll turn to the non-judicial states in that series. So the actual re-filings I think start next Monday I thought we said.

In the meantime, Bank of America has still not formally resumed foreclosing, and now that MERS is effectively out of the game, we doubt it will do so for a long, long time. Yet what is interesting is that the daily cost of each foreclosure delay costs $30 as suggested by Donald Bisenius. Multiply this by the 100,000 halted processes, and one gets $90 million per month, or virtually what BofA just announced in its 10-K. Annualized, this results in a billion dollars a year in fees. To quote from Moynihan again: "We don't see the issues that people are worried about, quite frankly." And this from the bank that just reduced its loan reserves again to beat earnings estimates, in the latest quarterly instance of accounting slight of hand...

Will the Bank of America CEO care to revise his statement on the costs of the foreclosure delay at this moment in time?

h/t MM

 

 


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Fri, 02/25/2011 - 19:52 | Link to Comment Duuude
Duuude's picture

 

AARRGGHH!!!!!!!!!!!!!

 

FUCKINGPAULSON!!!!!!!

Fri, 02/25/2011 - 20:43 | Link to Comment Zero Govt
Zero Govt's picture

Thanks, that Hank Paulson coin is fuking hilarious... you know your country is fuked when the parasites are minting their own faces on coins like 'legends' with their pastimes (bird watching)... the nations currency is just a vessel to bask in self-reflecting self-admiration, the debt slaves should just look on and admire... pass the sick bag

...the Timmay mint doing his Tax Returns should be a Collector Edition sell-out!

Fri, 02/25/2011 - 21:27 | Link to Comment Michael
Michael's picture

I wonder if Brian is related to the late Senator Daniel Patrick "Pat" Moynihan (March 16, 1927 – March 26, 2003)? You know how they like to keep things in the family.

http://en.wikipedia.org/wiki/Daniel_Patrick_Moynihan

http://en.wikipedia.org/wiki/Brian_Moynihan

Sat, 02/26/2011 - 01:57 | Link to Comment bankrupt JPM bu...
bankrupt JPM buy silver's picture

got my $5 May puts in, come to popa....

 

www.silvergoldsilver.blogspot.com

Fri, 02/25/2011 - 20:09 | Link to Comment mynhair
mynhair's picture

Shame!  Shame!  Shame!

Oh, this ain't Wisconsin....

Off with their heads!

Off with their heads!

Fri, 02/25/2011 - 20:13 | Link to Comment knukles
knukles's picture

How much gold can BoA's plane haul?

Fri, 02/25/2011 - 20:21 | Link to Comment bob_dabolina
bob_dabolina's picture

Will the Bank of America CEO care to revise his statement on the costs of the foreclosure delay at this moment in time?

I don't really agree with the original premise.

Fri, 02/25/2011 - 20:31 | Link to Comment Rogerwilco
Rogerwilco's picture

Lie? Such a harsh, uncivil, loaded word. We don't talk that way in Recovery America.

Mr. Moynihan needs some time to revisit that prior statement, and he might have to walk back on a word or two. Is that criminal? Of course not, now move along citizen, nothing to see here.

Fri, 02/25/2011 - 20:33 | Link to Comment apberusdisvet
apberusdisvet's picture

Be sure of the fact that we, us little people, will pay for the foreclosure crisis through every bit of extra taxation the elites can dream up while we are alive or later that they can wring from our cold dead hands or teeth (gold inlays).

Sat, 02/26/2011 - 00:42 | Link to Comment Fearless Rick
Fearless Rick's picture

That's if you "little people" allow it. Stop thinking and acting like a sheep and begin to see yourself as something more. Only then will America reclaim its greatness.

Fri, 02/25/2011 - 20:44 | Link to Comment 10044
10044's picture

HAHA... look at the losses on page 283 onwards

Fri, 02/25/2011 - 20:52 | Link to Comment UninterestedObserver
UninterestedObserver's picture

" Keep that statement in mind as we wonder out loud whether or not the CEO actively lied to investors during the company's November 2010 financials conference, not to mention the bank's Q3 conference call"

 

You mean they're not supposed to lie?

Fri, 02/25/2011 - 21:05 | Link to Comment Cdad
Cdad's picture

Thank you, Tyler...for wading through the debris.  Much obliged.  Let's all hope that truth finally shines on the criminal syndicate known as Wall Street.  Until that day, we simply cannot recover from this banana tree republic mess that we are in.

Fri, 02/25/2011 - 22:37 | Link to Comment max2205
max2205's picture

What a cookie cutter CEO. been there heard that. What a douche

Fri, 02/25/2011 - 23:00 | Link to Comment ZakuKommander
ZakuKommander's picture

For us anal-retentive types, it's Rule 10b-5, a rule promulgated under the authority of Section 10(b) of the '34 Exchange Act.  You can skip the parentheses next time.  

Fri, 02/25/2011 - 23:04 | Link to Comment ZakuKommander
ZakuKommander's picture

And don't junk me for being a lawyer.  It's a great profession: it's indoors, there's no heavy lifting, and you get paid for being an asshole.

Fri, 02/25/2011 - 23:29 | Link to Comment RockyRacoon
RockyRacoon's picture

Damn!  And all these years I've been doing it for free?

Sat, 02/26/2011 - 10:24 | Link to Comment snowball777
snowball777's picture

Self-representation, FTW!

Sat, 02/26/2011 - 01:05 | Link to Comment Fearless Rick
Fearless Rick's picture

I am gratified that ZH continues to keep the whole housing issue in front of the public. It is at the heart of our national morass of debt.

The problem is that not even any of the great minds in government (I'm only being half-sarcastic; some of these guys are pretty smart) has yet to figure out a way to wrap up such a massive fraud. Let's be realistic. The release of the plan to bang the banks for $20B the other day was nothing more than a trial balloon. Unless they're brain dead, they could see clearly from just the responses on this site that there was no chance of that plan working, so expect it to die still-born.

But, expect other ideas to be floated about. The problem is that the lies are now entangling everything and everybody. It's a sure thing that some AGs won't be pressured, and in a room full of 50 of them, there's certain to be disagreement. The feds are trying to act as a wedge between the states and the banks, but it's an uphill struggle. Meanwhile, Moynihan has and is showing that he's not cut out for this (who is, really?) He can't keep his facts straight and anyone who believes BofA has 50,000 people on mortgages needs a reality and math refresher course.

The truth is - and I speak from personal experience as I am managing a foreclosure from the mortgagor's end - that the banks are largely stuck because this is such an enormous problem involving their very existence, their solvency, and they are insolvent, and they know it. Thus, they are delaying all but the lowest-hanging fruit in the foreclosure chain. They seriously don't see the point of chasing more bad money because between lawyers and taxes owed on properties, less losses due to neglect and/or depressed values.

It's currently better for them to slow everything to a crawl since they have FASB on their side, for now, and keep the bad loans on the books rather than write them down. Plus, they have the government pressuring them to keep making loans to keep the economy "going."

People started defaulting en masse in 2007. We're close to four years into this mess and it's only getting deeper for the banks. The bankers are still in denial over solvency. They still have to get to and through - coupling addiction and grief theory - acceptance, then admission. They're still a long way off, but the truth is hard and it's coming out, little by little, every agonizing detail by agonizing detail. This is death by many thousands of cuts.

Sat, 02/26/2011 - 10:05 | Link to Comment Mach1513
Mach1513's picture

++

Sat, 02/26/2011 - 01:15 | Link to Comment poor fella
poor fella's picture

Moynihan is a patsy if I've ever seen one and has NO fuckin clue (perhaps an incognito gym teacher). Every time he attends a meeting or hearing the big boys speak first, and when the media focuses on him, he's a deer in headlights trying to remember his lines. It's good work if you can find it...  He'll be well compensated for taking just enough heat off the perps and never being found guilty himself, or even if found guilty (no matter how petty), he's been promised a Mozilo card..

 

Sat, 02/26/2011 - 01:32 | Link to Comment bunkermeatheadp...
bunkermeatheadprogeny's picture

Wow, Price Waterhouse Coopers really kept their legal distance on p. 420, "Report of Independent Registered Public Accounting Firm" which effectively makes their report meaningless.

Sat, 02/26/2011 - 10:38 | Link to Comment snowball777
snowball777's picture

If a candidate for president ran on a platform of insuring that the banksters see time in Ossining and insisted he would veto ALL legislation that came up before that agenda was satisfied, would you vote for them?

 

Sat, 02/26/2011 - 11:28 | Link to Comment falak pema
falak pema's picture

There are two types of smarties in the political game :

those who lie for the sake of their country... state lies.. for a greater cause.

those who lie for the sake of their own private interests...disguised as general good behind a fronted, false flag campaign.

These days, its really all about option 2°, not about option 1°, as imperial america is STILL, in spite of 2008, draped in past glory, reeking of  all-out, sanctified hubris... "can do no wrong, can see no wrong, can say no wrong"...Although to the general public, now that the curtain has fallen,  it looks exactly the opposite! Ole glory's avatar, now perceived as burning false flag, held by a bunch of renegade plutocrats!

The only one practicing option 1° is Benocide. He is the ultimate fall guy for all those behind his crusade : QE-infinity, on their behalf. He'll get burnt like the heretic, once the 'capitalist church' of powers that be behind the front, red and blue alike, $$$money is $$$money,  abandon him to public ire.

"HE failed", will be their rallying cry. "He misled us as a convinced crusader, a central bank Keynesian fanatic. Pity we believed  him". They'll then find a replacement for the next round. Unless they are first exposed themselves...Brave new world.

Sat, 02/26/2011 - 12:09 | Link to Comment bigking12345
bigking12345's picture

BAC services my mortgage, I asked to see who owns my loan and they sent me a letter stating that it was owned Fannie and then they said that was a error and that they owned it. So now I told then I won't pay until they prove they own it but they never answer the phone or repond by mail. I am still current on a underwater loan but if not for my un-american honesty that was instilled in me by my parents I would have punted a long time ago.

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