BofA pays $1.3 billion to Fannie, Freddie for foreclosure delays
Bank of America (BAC) will spend at least the remainder of 2011 revising affidavit filings in foreclosure cases around the country. In October 2010, BofA and other major servicers froze the foreclosure process nationwide when evidence of improperly signed affidavits surfaced in many state courthouses. BofA had to pay $1.3 billion in penalties to Fannie Mae and Freddie Mac in the first nine months of 2011 because of the delays, the bank disclosed in a Securities and Exchange Commission filing. According to RealtyTrac, more than 8.9 million homes have been lost to foreclosure since 2007. Lender Processing Services (LPS) said foreclosures completed in September spent an average 619 days delinquent. "We expect that these costs will remain elevated as additional loans are delayed in the foreclosure process and as the GSEs assert more aggressive criteria," according to the filing. "We also expect that additional costs related to resources necessary to perform the foreclosure process assessment, to revise affidavit filings and to implement other operational changes will continue for at least the remainder of 2011." The government-sponsored enterprises charge servicers for taking too long to complete the foreclosure process under specific, state-by-state guidelines. In June, Fannie said it would even charge servicers retroactively for such delays, though no particular servicers were mentioned. Federal regulators and the top 14 servicers signed consent orders in April setting standards for how troubled mortgage borrowers would be treated. The orders also included a review of 4.5 million foreclosure files of borrowers directly affected by the mismanaged process. The reviews began last week and could last months, regulators said. State attorneys general are still in talks with the servicers over a separate settlement to the robo-signing case that could include principal reduction for affected borrowers. In January, BofA resumed foreclosure sales in judicial foreclosure states, where the bulk of the robo-signing and foreclosure problems occurred, which include Florida, New York, and others. But the correction continues. BofA claimed extended foreclosure timelines for it and other servicers would only exacerbate the problem — a notion also issued by Republican presidential nominee hopeful Mitt Romney. "An increase in the time to complete foreclosure sales also may increase the number of severely delinquent loans in our mortgage servicing portfolio, result in increasing levels of consumer nonperforming loans and could have a dampening effect on net interest margin as nonperforming assets increase," the bank said. And the bank is already searching for new capital. Also in the SEC filing, BofA disclosed it was exploring an issuance of commons stock to raise nearly $3 billion in cash. Write to Jon Prior. Follow him on Twitter @JonAPrior.