Monday, November 08, 2010

BoA is FoS
Bank of America: How Cooked Are The Books?

Jonathan Weil of writes that Bank of America may be headed for serious problems, perhaps another bailout, months after returning $45 billion in TARP money to the federal treasury.

The problem comes down to the accounting for BoA's purchase of Countrywide Financial.n BoA is still carrying $4.4 billion of "goodwill" on its books going back to the Countrywide purchase even though it is clear that Countrywide never had a positive value, and BoA has discontinued the Countrywide name. The investing community values the company at less than the book value of its assets, and the biggest reason is doubts over the real value of $141 billion worth of Countrywide loans in BoA's portfolio. In my personal experience dealing with borrowers with Countrywide loans in what is probably an average market (not California, Arizona, Nevada or Florida), the real asset value of the Countrywide loans that I've seen is less than 80% of face value. From first hand and anecdotal reports by homeowners trying to get loans modified, my general impression is that BoA is mostly uncooperative and forces foreclosures that are in nobody's interest. You can expect this story to develop further in the coming months.

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