Report: BofA Needs Judge’s Favor in Latest Lawsuit
The financial crisis continues to plague the biggest banks five years after the fact, and the haunting won’t stop any time soon. The latest struggle is coming for Bank of America (NYSE:BAC), which has been forced to confront foreclosures and toxic mortgages for the another installment in the endless string of legal proceedings.
According to Bloomberg, the financial institution has asked a Boston judge to deny class-action certification to a number of plaintiffs who say they were forced to accept unfavorable loan terms and ended up being pushed into foreclosure. The news outlet reports the BofA legal team described the efforts as a “desperate attempt” to get class-action status and gain leverage in their individual legal fights.
Looking at the number of mortgages involved, it’s easy to see why Bank of America wants the request denied. Bloomberg reports a total of 300,000 mortgages could fall under the suit’s banner, ultimately giving the group strength in numbers and increasing the exposure of an already beleaguered bank. As usual, BofA and its competitors were in the news for similar legal actions earlier in the week.
The AP reported on Thursday that Bank of America was preparing to face civil charges courtesy of New York’s Attorney General. The charges revolve around more mortgage-related claims, in what is proving to be the bete noire of the bank as it tries to fight its way to better profits. Merrill Lynch may also be on the New York AG list when handing out civil charges in the coming weeks.
According to Bloomberg estimates, the amount of claims — $45 billion in all — has long since passed the burdensome mark, though the company is improving its performance in this department. One of the stated goals of CEO Brian T. Moynihan is trimming the company’s exposure in mortgages. Litigation costs tallied a whopping $471 million in the second quarter, according to the bank, yet it was 50 percent less than the bank spent in that department for the first quarter of 2013.
Bank of America has announced cuts to departments dealing with toxic mortgages and all their trappings, and the company’s second-quarter earnings jump (a 70 percent increase) would indicate to investors the strategy is working. According to Bloomberg, the bank has managed to cut its expenses on litigation each year since 2011, though it is unclear how the latest string of lawsuits will factor into the numbers. Citigroup (NYSE:C) also received some bad news this week. Mortgage-backed security risks essentially devalued the company’s stock price, Dan Ritter reported on this site on Thursday. As a result, Citigroup is on the hook for $590 million, pending the approval of New York Southern District Court judges. Citigroup was also in the news this week when it lost a minor (though disputed) case in arbitration. The bank will pay an investor $10.75 million as a result.
Meanwhile, JPMorgan (NYSE:JPM) agreed to pay MF Global at least $50 million in connection with the latter’s bankruptcy, which should help JPMorgan avoid larger fees in the future. Finally, Bloomberg reports Morgan Stanley (NYSE:MS) set aside $199 million for litigation expenses in the second quarter after allocating $4 million for the first quarter’s court costs. As Bank of America and the rest of the big banks have learned, one can never prepare enough for upcoming days in court.