Bank of America Corp (NYSE:BAC) investors had plenty to celebrate this week as the company reached a historic settlement with bond insurer MBIA Inc. (NYSE:MBI). However, as they go into the bank’s annual shareholder meeting on Wednesday, many may have questions about a newly filed lawsuit against it charging it is violating the terms of the National Mortgage Settlement.
The continuing legal settlements Bank of America Corp (NYSE:BAC) has faced stemming from the role it played in the mortgage crisis have taken a toll on its finances. Settlements are estimated to have cost the company at least $35 billion. One has to look no further than its first quarter earnings report to see how paying out this kind of money has affected its finances. While the MBIA Inc. (NYSE:MBI) settlement, totaling roughly $1.7 billion, is good news, the possibility of having to face yet another potentially large sum lawsuit related to the mortgage crisis should be just as worrisome for investors as it is for the bank.
The announcement of this lawsuit seems almost to be timed so that it will be a talking point at the shareholder meeting. It is being brought by New York Attorney General Eric Schneiderman, who has brought several actions against banks associated with the mortgage crisis.
He’s had enough with Bank of America Corp (NYSE:BAC) and Wells Fargo & Co (NYSE:WFC) not abiding by the terms of the settlement based on the allegations he makes in this latest release detailing them. Since October 12, his office has documented 339 violations of standards the banks agreed to abide by, according to the release, which came out on Monday. The violations include the banks not notifying borrowers about any missing documents for processing loan modifications applications. Also, the banks are charged with not making a decision on complete loan modification applications within the required 30 days.
Bank of America Corp (NYSE:BAC) and Wells Fargo & Co (NYSE:WFC) were among the five mortgage servicers that agreed to the settlement. The others were Ally Financial, Citigroup Inc (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM). They are on the hook for $25 billion for their roles in several questionable mortgage loan servicing and foreclosure practices. This includes what has become known as robo-signing, a practice in which loans were approved for borrowers without due diligence steps being taken to verify them. These kinds of actions by the banks played a major role in the housing market collapse.