CHICAGO, June 30, 2011 /PRNewswire/ -- Zacks.com announces
the list of stocks featured in the Analyst Blog. Every day the
Zacks Equity Research analysts discuss the latest news and events
impacting stocks and the financial markets. Stocks recently
featured in the blog include: Bank of America Corp. (NYSE:
BAC), BlackRock Inc. (NYSE: BLK), MetLife Inc. (NYSE:
MET), Assured Guaranty Ltd. (NYSE: AGO) and JPMorgan
Chase & Co. (NYSE: JPM).
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Here are highlights from Wednesday's Analyst Blog:
Mortgage Claims Cost BofA $8.5B
Bank of America Corp. (NYSE: BAC) has hit the headlines
again and this time for a wrong reason. The company is said to be
reaching an agreement to pay $8.5
billion to a group of investors who had suffered substantial
losses for their investments in mortgage-backed securities sold by
the company prior to the housing market failure, according to a
Wall Street Journal report.
The group of investors, including names such as BlackRock
Inc. (NYSE: BLK), MetLife Inc. (NYSE: MET) and the
Federal Reserve Bank of New York
alleged that prior to the financial crisis, Countrywide Financial
Corp., a company that was acquired by BofA in 2008, had sold those
securities that were tied to bad-quality loans.
Neither the quality of the borrowers nor the collaterals matched
the standards that Countrywide assured to the buyer of these
securities. The loans were not even managed well and lacked proper
paperwork. Therefore, these investors sought a buyback relief of
$47 billion in mortgages backed
securities that were offloaded by Countrywide Financial before it
was acquired by BofA. The agreement, if reached, would close a
nine-month fight between BofA and the investors.
The acquisition of Countrywide substantially increased BofA's
mortgage exposure. As a result, following the collapse of housing
market, mortgage repurchases claim risk for the company has
increased significantly. BofA reached agreements of similar nature
but of lesser amounts earlier this year with Fannie Mae and Freddie
Mac as well as with Assured Guaranty Ltd. (NYSE: AGO).
Such hefty payment, which represents the highest by a financial
services company till date, would definitely dent BofA's financials
and reputation. In addition to this, revenue headwinds and issues
related U.S. regulatory reform continue to restrict the company's
earnings.
It could also motivate other investors to ask for claims from
mortgage lenders like JPMorgan Chase & Co. (NYSE: JPM)
for their mortgage-backed securities tied to soured loans.
As such, we have an Underperform recommendation on the
stock. Shares of BofA also retain a Zacks #5 Rank, which
translates into a short-term 'Strong Sell' rating.
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