Will Bank of America (NYSE:BAC) Learn Its Lesson
Since last week, the home mortgage rates in Bank of America have stayed the same. This bank offers a 30-year fixed mortgage and refinance rates at 4.750%, a 15-year fixed mortgage and refinance at 3.875%, a 7-year ARMs at 3.375% and a 5-year ARMs at 3.000%. However, the refinance department of this bank claimed that they have lowered their 5-year ARM at 3.000% and a 7-year ARM at 3.500%. Further, the bank reported earlier this month that this step is taken since they should meet the fall of their first-quarter profit by 39% due to the higher fees from lawsuits and expenses related to their mortgage business. As reported, this bank is having a lawsuit from investor and insurers who felt cheated by this bank through the fraudulent documents during the housing boom. As a result, this bank should spend $1 million to repurchase mortgages and $352 million for legal costs they are facing.
Buying Mortgages
As mentioned above, this bank faced a drop on its first quarter profit by 39% in view of higher fees from lawsuits and costs related to its mortgage business. It was caused by the complaint from the investors and insurers to trick they had from the fraudulent documents during the housing boom. As a result, this bank should spend $ 1 million to repurchase mortgages and $352 million to its legal costs. The most troubling loan was gotten from Countrywide Financial Corp when buying the mortgage company in 2008. At that year, Countrywide Financial Corp was facing bankruptcy due to the default status of the number of borrowers as a result of the skyrocketing of the home loans. This bank then gave 13.3 million loans with an unpaid balance $2.05 trillion at the end of September, according to Moody.
Penalty
It could be good news for the customers of this bank. As a result of the overhaul by Congressional legislation in 2009, this bank has not had a penalty interest rate on its credit card. The Credit CARD Act limited the costs that lenders could change their customers. Further, the lenders were restricted to increase their interest rate. Though this motion will surely displease the customers, this bank is not the first one to do it. Most U.S. credit card lenders like JPMorgan Chase (NYSE: JPM), and Wells Fargo (NYSE: WFC) have had similar programs since the CARD Act was adopted.
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