This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Will Bank of America Rally in 2011?

NEW YORK ( TheStreet)-- Bank of America (BAC - Get Report) looks ugly, yes, but when does it get to be too cheap to pass up?

That's the question analysts and investors have been asking since October, when it finally sunk in that housing-related legal challenges were likely to cost tens of billions of dollars and that Bank of America appeared to be on the hook for most of it as a result of its acquisition of Countrywide Financial in 2008.

Bank of America
Bank of America could be set for the upside.

Countrywide was one of the most aggressive actors out there when it came to making home loans that were unlikely to be repaid. The lender appears to have ramped up its mortgage operation just as the housing market was at its frothiest. Countrywide was the top U.S. mortgage originator with $463 billion in 2006, followed by Wells Fargo (WFC - Get Report)at $398 billion, with JPMorgan Chase (JPM - Get Report)a distant third at $173 billion, according to data from trade publication Inside Mortgage Finance that Countrywide cited in its 2007 10-K.

In 2007, however, Wells Fargo cut its originations way back to $272 billion. That was still good for second place, but well behind Countrywide's $408 billion in originations. Also worth noting is that Bank of America's own mortgage unit, which wasn't among the top five originators in 2006, showed up at No. 4 in 2007 with $190 billion in originations. Add that to the $408 billion from Countrywide and you get nearly $600 billion in mortgages originated in the last year of the housing bubble.

Look at the last three years of the housing boom and the picture may be even starker. From 2005-2008, Bank of America sold more than $2 trillion in residential mortgage loans--$1.12 trillion of which were backed by government sponsored entities Fannie Mae (FNMA.OB)and Freddie Mac (FMCC.OB) and another $963 billion of which were guaranteed by private entities in what are known as "private label" deals, according to Deutsche Bank research.

By contrast, Wells Fargo, the second most active residential lender, sold about $715 billion worth of home loans during that same period, and the numbers drop steeply from there. Citigroup (C - Get Report), the fourth-largest lender from 2005-2008, originated some $338 billion worth of home loans.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BAC $16.01 0.00%
C $53.49 0.00%
FHN $14.39 0.00%
JPM $61.77 0.00%
PNC $92.95 0.00%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.39 +12.89 0.61%
NASDAQ 5,008.0960 +44.5690 0.90%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs