Bank of America Wants to Settle ... Really?

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Bank of America wants to reach a settlement with the Government in order to prevent further claims and lawsuits regarding improper foreclosures and evictions. So, which side is holding the best hand?

We believe that the Government has an excellent hand and should not rush into a deal with Bank of America. The Government has millions of Americans on its side. American that were fraudulently deprived of their homes. In addition, there are hundreds of courts across the nation that are dismissing foreclosure cases in favor of homeowners. This is a lot of ammunition.

The bank is offering to reduce the principal on many mortgages that need a loan modification. This is a sensible business practice that many lenders should all be doing in the first place. This is nothing new to the table.The bank has already posted a second quarter loss of $14.5 billion due largely to mortgage related claims. Back in June this year, the bank paid a settlement of $8.5 billion to a group of investors who suffered significant losses in mortgage backed securities. The winning companies include BlackRock Inc and MetLife. At this point Bank of America is trying to stop the bleeding.

Other recent claims paid by Bank of America were $1.3 billion to Freddie Mac and $1.5 billion to Fannie Mae. Many analysts considered this payout a very attractive deal for the bank.

It should be noted that Freddie Mac and Fannie Mae are not part of the present negotiations. Fannie Mae still owns about $397 billion in mortgages from Bank of America.

Lets hope the Government doesn't drop the ball on this transaction by trying too hard to reach a settlement.

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