Bank of America's mortgage crisis costs become a recurring problem

Wed Apr 16, 2014 2:54pm EDT
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By Peter Rudegeair

(Reuters) - Bank of America Corp's (BAC.N: Quote) mortgage pain is lasting longer than expected, leading some investors to wonder if the massive expenses being incurred have become a recurring cost of doing business instead of being dismissed as one-time items.

The bank on Wednesday posted $6 billion of litigation expenses for its first quarter, far exceeding the $3.7 billion of settlement costs that investors had previously known about.

Since the 2008-2009 financial crisis, Bank of America has logged some $50 billion of expenses for settlements of lawsuits and related legal costs, before taxes. Without those charges, its income before taxes would have been about three times higher.

The expenses stem mainly from settlements linked to mortgages that Countrywide Financial Corp made during the housing boom and sold to investors. Bank of America bought Countrywide in July 2008, just as the mortgage collapse was triggering the crisis.

Bank of America has resolved most of the outstanding litigation with investors, and it is now focusing on settlements with the U.S. Department of Justice and other enforcement agencies.

On a conference call on Wednesday, analysts pressed Bank of America's Chief Financial Officer Bruce Thompson to indicate when the bank will stop piling up big litigation costs.

Thompson said the bank has worked through many of its outstanding issues, but he added, "I think we need to be realistic ... it is very hard to predict."

His response was more subdued than in October 2013, when he said on a conference call with investors: "I think at this point relative to our peers we have tried to be out front and get through some of the larger settlements that we have."   Continued...

A Bank of America sign is shown on a building in downtown Los Angeles, California January 15, 2014. REUTERS/Mike Blake