Bank of America Leads the Pack in Foreclosures
Homeowners, real estate professionals and economists can all breathe a little easier these days. The housing market is improving, home sales and prices are going up and interest rates are still affordable (for the time being). And while the market has pulled back from the edge, we’re not out of the woods yet.
According to 24/7 Wall St. there were over 750,000 homes in foreclosure earlier this year! Bank of America led the other banking giants when it came to foreclosing on homes with Wells Fargo a close second.
Bank of America Foreclosure Numbers
To get a true feel for how much money and how many people’s lives this effects, you have to take a look at the numbers involved here:
- Loans in foreclosure: 96,319
- property value: $203,956
- Percent seriously underwater (a loan-to-value ratio of at least 125%): 61%
- $23 billion in mortgage debt
Bank of America didn’t help itself out in the foreclosure arena when they purchased Countrywide Financial in 2008 for a “fire-sale” price of $4.1 billion.
Buying the company meant taking on a lot of their mortgage baggage and when the housing crisis erupted, that baggage turned into a lot of bad investments. This acquisition is the main reason B of A is “winning” the foreclosure race.
B of A: Where Winning = Losing
Bank of America and the others may not actually own the mortgages themselves. Often, they are the company servicing the loan; collect payments, pay taxes and insurance payments and foreclose if necessary. If people are paying their mortgages, then B of A collects their fees and makes some money.
If they don’t and the homeowner is forced into foreclosure the banks have to spend money to start the foreclosure process. In B of A’s case, their purchase of Countrywide and its bad mortgage assets has led to costs upwards of an estimated $40 billion as of 2012.
What they thought was a deal has turned into a nightmare on their balance sheets. The company and others that took on large amounts of mortgage related debt or servicing contracts are doing what they can to scratch a profit out. Unfortunately, this has led to a slew of unethical and sometimes illegal behavior.
Bank of America has had to deal with lawsuits, fines, government probes and even a federal criminal racketeering charge. Yes, the bank down the street is being charged under the same laws used to attack the Mafia!
Foreclosures hurt everyone in the process.
The homeowner loses their house and equity they had in it, mess up their credit and have to deal with the economic and emotional fallout. The neighborhood and other home owners lose because too many foreclosed homes lowers property values.
With rampant foreclosing, banks start to tighten up lending and less houses are sold. B of A alone cut the amount of home loans they issued in 2012 to $78.7 billion from $156.1 in 2011! Less loans means less construction, fewer jobs, less money in the economy and the cycle repeats itself.
The domino effect of foreclosures rips through our entire economy and makes our future uncertain. If you find yourself facing foreclosure, make sure you educate yourself about all of the possible repercussions and , if necessary, speak to a legal expert in your area.