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Bailout Queens Bank of America and Wells Fargo Most Sued Banks in 2010

A recent report by Institutional Risk Analytics (IRA) says Bank of America, and Wells Fargo are two of the most sued financial service firms in the United States.

IRA says that mortgage exposure is what is causing these two banks and others in similar situations to be embroiled in so many federal legal cases. Not only that, the California-based firm mentions the added burden many of these companies are also facing in litigation that will not reach federal court, such as cases involving foreclosure practices.


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Bank of America: Probably Still Screwed

Is Bank of America going to need another bailout? It sure looks that way!

From this article:

"I’m not so sure the problems at Bank of America are all in the past. Let’s focus on Bank of America’s mortgage lending. Now everyone knows the old story line about mortgages that goes like this: following the credit crunch of 2008, mortgage lending was much tighter, underwriting standards much better, and mortgage quality much higher.

The problem is that there is very little evidence to support this. In fact, we have lots of anecdotal evidence that the mortgage pool of 2009 might be nearly as toxic as those from the worst years of the housing bubble.

Let’s run through some data points on 2009:

* The mortgage volume was GIGANTIC. Around $2 trillion of home loans were made in 2009, the majority of them by the largest banks. That’s not really that far behind 2007’s volume of $2.4 trillion.
* Bank of America was the second largest mortgage lender in 2009, behind Wells Fargo. Its volume was up 116% over the previous year. Meanwhile, Citigroup and JP Morgan were pulling back, allowing the size of their mortgage business to shrink.
* Freddie Mac recently conducted a review of a sampling mortgages sold to it by Citigroup, and discovered that mortgages in the sample from 2009 had a 32% defect rate. It’s highly likely that other banks, including Bank of America, had similarly flawed mortgage processes in 2009.
* The recent robo-signing scandal has demonstrated that banks had pitiful internal controls over the foreclosure process as late as October of 2010. There’s good reason to suspect that the mortgage origination and purchase process is still broken too.
* The government intervened heavily in the housing market by putting in place a home buyer tax credit that allowed some buyers to pay for their downpayments with the tax credit. Essentially, some of these people put no money into their houses. We have no good estimate about how large this problem might be.
* The growth of the balance sheets of the FHA, Fannie, and Freddie took a lot of the immediate risk out of lending—risk that could return if the government mortgage companies start demanding that banks repurchase loans or cancelling insurance."


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