Is Bank of America Being Thrown Under The Bus??

    ...well, maybe.  JP Morgan recently unveiled a presentation detailing BAC's potential exposure to 'putbacks' - a nice way of saying that if investor groups who hold an interest in the polluted RMBS's (Residential Mortgage Backed Securities) can find fault with the robo-signed crap they bought, they can call for BAC to buy back the asset... at FULL selling value.  That's 100 cents on the dollar, for many of the toxic assets now worth between 50 and 60% of what they were originally marked.  


    Bank of America, however, announced Monday that it will resume up to 100,000 foreclosures in the 23 states that involve a judge to complete the seizure.  This, a mere TWO WEEKS after its self-imposed moratorium that in retrospect... never really happened.  Via the statesmanjournal.com: In Tampa, Florida, Monday, 10/13, a single judge approved 11 foreclosures in just 18 MINUTES.  Meanwhile, foreclosures continued in the 27 states that don't require a judge's signature.  End result?  Less than 30,000 of the original 100,000 foreclosures already slated to be finalized were delayed - by two weeks.  Nice.  


    In Massachusetts, a petition for class-action status is being sought by a group of borrowers who accuse BAC of defrauding them via the HAMP program. All parties were apparently given the now-infamous "trial mod", apparently complied, then were told that they didn't qualify for HAMP relief, and would they kindly pay the last 3 months' difference in payments, along with penalties.  A point: BAC (and any other loan servicer) receives $1,000.00 from the US Treasury as an incentive to work with homeowners, for each loan it modifies.  BAC has filed a motion to dismiss, en-masse, the entire suit, saying that borrowers have no legal standing in an agreement between itself and the Treasury.  This should get interesting, in a slow-motion train-wreck kind of way.


    And, via Bloomberg: The New York Fed, PIMCO, and a company called Black Rock are jointly suing BAC over mortgage 'putbacks' outlined above.  The numbers begin at $47 billion, and spiral outward from there; this is fairly aggressive shit, people. 


    And the hits just keep on comin'... The Financial Fraud Enforcement Task Force, representing the Administration, has entered into the preliminary stages of an investigation into whether banks and other servicers misled Federal housing agencies with their practices during the run-up, and now during the incredible run-down.


    Sure drives an argument for BAC goin' down like a clown, doesn't it?  All these folks, and agencies, piling on, Federal Task Forces and stuff... how cool would it be for the Obama Administration to be able to take the leashes off all the hounds, grab that little clause in the Financial Reform Act, and dismantle America's largest bank?  Striking back just in time to save his chances at a second term, maybe?  It would be stunning, wouldn't it?  And a great way to rattle sabers at the other big boys, while you're at it.  Politically, it's a gold mine.  I mean, my inner, middle class nerd is doing cartwheels over the whole idea!


    Until I started digging a little deeper, anyway. <sigh>  According to ZeroHedge.com, two problems arise, and they all focus on Black Rock, the third party named above in the lawsuit.  Seems they're owned BY Bank of America; a whopping 34% owned, in fact.  And, in a particularly bizarre turn of events, Black Rock happens to be the SINGLE LARGEST SHAREHOLDER of Bank of America, at 5.35%. With that in mind, the Financial Fraud investigation sounds less like a shot across the bow, and more like a "Hey!  You guys didn't screw us, too, didja?"  Remember that the Fed owns more mortgage and RMBS's than anyone else at this point...


    Which leads me to think that this latest deal with PIMCO, NYF, and Black Rock may be the mother of all pre-settlement bluffs.  If you're stuck with a bunch of this toxic crap, and you see, essentially, BAC going after itself, you may want to consider a hasty - and reduced, of course - pre-trial settlement.  Poof!  $47 billion in putbacks gets cut - in half? by two thirds? - time will tell, but this bears watching, as it will set legal precedent for potentially stopping the unwinding of the mortgage mess.


    If that happens, it's business as usual, and as usual, we're screwed.


    On a lighter note - in a kind of hysterical, if-I-don't-laugh-I'm-gonna-puke way, here's a great clip from RJ Eskow of the Huffington Post:

    Jamie Dimon and the other mega-bankers who derailed the economy have a new PR campaign to sell you. They're saying that families who can't pay their mortgages must bear the blame -- all the blame -- for the foreclosure crisis. That means the public should just ignore banks' widespread lawbreaking in the registering and transfer of property titles. For the bankers who would appoint themselves the nation's moral arbiters, It's always somebody else's fault.

    Not that we should be surprised. After all, the Mortgage Bankers Association, which calls itself "the voice of the real estate finance industry," did a short sale on its Washington DC headquarters which left CEO John Courson uncharacteristically speechless. It seems he didn't want to talk about how he walked away from the loans he took out to buy that building. But before the cat got his tongue, Courson managed to lecture homeowners on their "legal obligation" and the terrible "message they would send" by walking away from their mortgages.

   (Thanks, RJ... I needed that.)

    

    Brutal Truth