I'm having trouble interpreting this--if they are getting defensive and trying to refute the charges being levied in the media, then it seems they *arent* going to back down...
BUT, if you interpret their comment about the potential losses as basically, "calm down guys, we're not seeking huge damages, everyone's going to be fine", then that seems pretty good for banks...
separately, we already know the case is bullsh*t, if you read the actual filings, they have no case
FHFA waited as long as possible to file,their back's were againts the wall for them.They are trying to state imo with this release that it was half hearted attempt at saving face.They know that they have litlle to no chance at recovering fraction's of a penny on this case!!!imo
You are correct. The disclosure may be a matter of compliance with the law or failing to disclose the risk of non-compliance like in safe harbor clauses. But most important is that damages claimed based not on every 'i' or 't' are irrelevant; what matters in awarding damages is what or who actually CAUSED the damage. And when the housing bubble is taken under consideration, it doesn't matter who bought the house or how much income they earned or what the interest rate was. The only thing that mattered is WHERE THE HOUSE WAS LOCATED. THAT WAS THE MOST IMPACTFUL DETERMINANT OF HOMEOWNER DEFAULT.
the ambiguity issue is but one of the many areas where differences in opinions may arise.
you can expect to spend a couple of years reading up on legal references pertaining to the current suit. I don't see how it's going to help you.
you are a BAC stockholder, right? you are not a party to the suit. why waste your time on the legal aspects of the case which won't help you make money in the stock (at least not in time)?
you would be far better off reading up on the financial aspects of the bank, though I don't think you have enough time left to do that either.
worse still, there is a national economic crisis looming on the horizon. it may hit in 10 months or 3 years. hard to say. but it's coming.
your no.1 goal should be to prepare for the worst - make money fast.
Sanford Bernstein estimates the FHFA cost for BAC will be $11.5 billion: Here's the news from Reuters w/ link:
“…John McDonald, bank analyst at Sanford Bernstein, said in a research note on Tuesday the largest banks could face billions in additional costs in his worst case estimate.
McDonald said that in a similar case filed against UBS earlier this year, the FHFA claimed $900 million in damages from $4.5 billion in mortgage bonds.
Using that ratio, McDonald concludes the banks could face $39 billion in losses, including $11.5 billion at Bank of America Corp (BAC.N), $6.5 billion at JPMorgan Chase & Co (JPM.N) and $700 million at Citigroup Inc (C.N)…”
I saw that note, and all he's doing is using the same 20% recovery rate that the government is trying to get out of UBS in the case filed in July. It's been reported the FHFA is seeking $900M out of $4.5 billion total principal.
That's really a thoughtful analysis by Mr. MacDonald, let's apply 20% to everything! Because everything's the same, and of course the government is going to win!
Next piece of BS research you'd like to cite?
I did a little research on those nuggets you provided and the way I read it the plain english interpretation is favored unless there is ambiguity.
So, I'm still wondering where the ambiguity is in those disclosures. I'm sure there is some, unless the investor took a look at all 5400 mortgages in the offering there will be ambiguity. I'm just wondering where ambiguity ends and full disclosure begins.
Here is another example. In appendix D of the disclosure I read BAC modeled what the portfolio return would be if defaults rate went as high as 4% and recovery went as low as 50%. That reads pretty clear to me about putting parameters around the magnitude of the losses possible over time.
In addition, they disclosure talks about the risk of using the MERS system - how it is unproven and one court in Florida had ruled that at was not adequate for a foreclosure. That sounds pretty comprehensive to me.
Now, I admit I'm being a bit pedantic. Because what we are really looking for is facts that they did not disclose - so they obviously wouldn't be in the disclosure. But, the ones they mentioned; appraisals and occupancy are very well disclosed.
to fully interpret these filings one has only to remember the lesson of the Titanic: women and children first ( who are strictly first class passengers);
...thereafter, everyone else is on their own!
There's nothing between the lines to read.
This is a very clear document: it states, sorry some of you are unhappy but the law is the law and we are going ahead and suing for recompense. The attorneys' general lawsuits are also valid lawsuits but their issues are different from those in our complaint.
We are not suing to obtain 200 billion in recompense because that isn't the amount we are claiming we have lost, rather that is the sum we invested, but we are not seeking full restitution in that sum, so, relax, but don't think for one second that we are going to back down from this lawsuit.
Great Post, thanks. (Even if you arent a Lawyer ;-) )
This was an important point as well.
"Actual recoveries will be determined based on filings by the parties, evidence and judicial findings. At this time, it would be premature and potentially misleading to estimate the size of any potential recoveries. However, press reports that FHFA is seeking nearly $200 billion in damages or recoveries are excessive; such numbers reflect the original amount of such securities purchased, not the losses incurred or the potential recoveries at the end of this process. In particular, use of original unpaid principal balance as a measure of potential recoveries is incorrect as it does not equate with the losses incurred and it does not reflect the repayments of principal that have already occurred or the remaining value of the securities."
As an aside, if you are tired of weeding through the crap here, come join us on a private (Free) Group that wants to intelligently discuss BAC. Email if you are interested. Thanks!
Jack: Happy to read something on this Board of a serious and sincere nature. Accessed your profile but unable to figure a way to send you an email. Perhaps posting a 'comment' on your profile would have helped. Or perhaps your email link isn't activated?? Wayne
196 billion is what the banks owe fannie and freddie. Government most likely to settle for less. BAC needs to act on a settlement and take the lead first and get it over with. ITS NOT GOING AWAY. THE LONGER YOU WAIT THE BIGGER THE PROBLEM USUALLY GETS. investors going to get screwed worse than they allready are if these lawyers do not act in a responsible timeframe.
The banks deliberately mislead clients to gain profits...they all deserve to fail, and judging by the downtrends in some of the banks, the wait shouldn't be that long. I am sure there are other surprises out there, as well, and some of these banks are still lying about their capital needs. End of story.
not a lawyer, but i can read! read the filings, they've been analyzed pretty comprehensively on this site:
don't want to rehash all the points, but the FHFA is basically contesting the banks' underwriting as using inflated appraisals and misreporting whether the borrowers were investors vs. owner-occupied. banks can very easily defend that they had no reason to necessarily contest the appraisals at the time, and the owner/investor thing was based on self-reporting, which everyone knew. also, the FHFA tries to rely on the press reports of some of the bank's underwriting errors--that prob won't even be admissible. anyway, read the filings, they're at the FHFA site also.
but this digresses anyway from the original question--how is one to interpret this newest release?