This Day On The Street
Continue to site
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

Banks Slow With Investors' Foreclosure Bill: Street Whispers

The variance in disclosure of the Federal Reserve and OCC brokered settlement among the publicly traded lenders raises questions as to whether investors have been fully informed of the prospective fourth quarter earnings hit.

Bank of America, Wells Fargo and Citigroup are all taking noticeable earnings hits because they will be adding on provisions previously set aside to cover the costs of any settlement in the foreclosure review. While the $8.5 billion total is in line with previous sketches of a deal, the $3.3 billion in cash lenders will collectively pay out to homeowners in foreclosure is a new development.

For Bank of America investors, the Independent Foreclosure Review settlement and a $10 billion deal with Fannie Mae appears to have the biggest impact. In total, both settlements appear they will cost the bank in excess of $5 billion.

Bank of America will make a cash payment to Fannie Mae of $3.6 billion and also repurchase for $6.75 billion certain residential mortgage loans in a settlement announced prior to Monday's stock market open. In that deal, Bank of America said it would take a hit to fourth quarter earnings by way of a $2.7 billion increase in its provision for representations and warranty costs with the GSE.

Further down a press release announcing a flurry of developments to the bank's mortgage lending operations, Bank of America goes on to state its earnings will take a further $2.5 billion pre-tax hit in the fourth quarter for its Independent Foreclosure Review settlement.

Bank of America also announced a deal to sell $306 billion in mortgage servicing rights to Nationstar Mortgage (NSM), Walter Investment Management (WAC) and Newcastle Investment Corp (NCT).

While, a flurry of accounting items will color Bank of America's earnings in addition to settlement costs, the bank closed its Monday presser with a dim outlook for fourth quarter profit.

"Taking into account the effects of all the items above, Bank of America expects earnings per share to be modestly positive for the fourth quarter of 2012," the bank said in a press release.

As part of the IFR settlement, the Fed and OCC said on Monday announced that the foreclosure review had ended, and that the servicers subject to the foreclosure settlement would make $8.5 billion in cash payments and other assistance to borrowers victimized by servicing errors.

Borrowers could receive up to $125,000 each, in a deal that is split between $3.3 billion in direct payments to eligible borrowers and $5.2 billion in other assistance such as modifications.

-- Written by Antoine Gara in New York
2 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
Only $9.95
14-Days Free
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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $14.07 -0.42%
C $44.42 -0.54%
JPM $61.37 -0.32%
MET $42.73 -1.90%
PNC $85.38 0.01%


Chart of I:DJI
DOW 17,681.26 +30.00 0.17%
S&P 500 2,054.80 +3.68 0.18%
NASDAQ 4,733.98 +8.3410 0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs