Receiving Wide Coverage ...
B of A Settlement: "An albatross that the bank has fought hard to loosen," that's what a Washington Post article on B of A's $11.6 billion settlement with mortgage giant Fannie Mae calls the bank's acquisition of Countrywide, which has now collectively cost B of A more than $40 billion in losses. It remains unlikely that the bank's most recent related payoff will help them shake that bird entirely. According to this American Banker article, several analysts think, moving forward, B of A's mortgage woes will linger with one writing in a research note that the bank's "financial penance for legacy issues will continue." And, even if the litigation is over, the apparently accursed acquisition's already had a lasting effect on the megabank's business model. Both the Post and the Times point out that the settlement represents B of A's continued efforts to pull out of the mortgage market, since the bank was required to sell off about 20% of its already scaled back loan servicing business to pay off Fannie Mae. This retreat, of course, isn't exactly a good thing. "This is part of a broader consolidation of banks and that is something that we should all be very, very concerned about," one analyst told Dealbook. "Anything that leads to less competition can only be bad for consumers." "You have less competition, and as a result the pricing has gotten worse," another told the Post. "Mortgage rates should probably be closer to 3.25 rather than 3.5. One of the reasons they aren't is because banks aren't that competitive and don't have to be to get business."
An $8.5 Billion Mortgage Hangover Cure?: Also unclear is whether the separate $8.5 billion settlement that ten of the largest U.S. banks have entered into with regulators to end disputes over alleged foreclosure abuses will do anything to increase competition in and bolster the mortgage market. "Reducing banks' legal uncertainty could ultimately clear the way for a wave of new loans," a Journal article notes. "But soft job growth and stagnant incomes, as well as policies adopted by regulators and … Fannie Mae and Freddie Mac are crimping the availability of credit." The lingering uncertainty is unfortunate since increased lending is the primary upside of a settlement many consumer advocates and pundits view as way too low. "The settlement is a cheap out for banks like Bank of America, Wells Fargo and JPMorgan Chase," blogger Francine McKenna wrote over at Forbes. "There's no accountability, transparency or behavorial changes required at the servicers."
Adding salt to the wound is the fact that the settlement also serves as an indication that earlier efforts to help homeowners, in the form of an expensive foreclosure review process that unduly benefitted the consultants hired to conduct them, were, as this FT article notes, "flawed from the start."