HW 30 plunges with all major stock indices
BofA drops as jury holds Countrywide liable for toxic loans sold to GSEs
Weak earnings pushed all the major stock indices down Wednesday, pulling the HW 30 index of mortgage finance and real estate stocks with it.
The HW 30 fell 0.70%, while the Dow Jones edged down 0.35%. Furthermore, the Nasdaq and the S&P 500 declined 0.57% and 0.47%, respectively.
The big story Wednesday afternoon was Bank of America (BAC), which declined 2.13% in trading.
The mega lender took a major hit in afternoon trading.
Around the same time, a federal jury in New York ruled that the lender – as the official purchaser of Countrywide – is liable to Fannie Mae and Freddie Mac for selling low-quality, toxic loans to the housing agencies in the heat of the housing bubble. At the point of origination, Countrywide was not part of Bank of America.
BofA finished down, with the jury verdict adding to its ongoing litigation woes.
The lender also may be on the hook over additional legacy mortgage issues, with news reports suggesting the Federal Housing Finance Agency is seeking a $6 billion deal from BAC to settle issues stemming from old Countrywide mortgages.
But the big black eye for Bank of America was Wednesday's jury verdict, a decision that may pave the way for other litigants.
One industry insider called the decision “an interesting datapoint,” adding that it may "help the government or future plaintiffs who are trying to extract settlements."
That alone is enough cause for concern among investors in the banking sector.
Wells Fargo (WFC) also took a minor hit, declining 0.42% on the HW 30 index.