vinod1 Posted September 22, 2011 Share Posted September 22, 2011 Pretty good article from Todd Sullivan over on Seeking Alpha about BAC's mortgage put back risk. http://seekingalpha.com/article/294629-bank-of-america-s-mortgage-put-back-risk-what-are-investors-really-entitled-to <I> We now have to add the $63,840k in payments received over the 4 years. Since investors are not entitled to interest payments, just return of principal, the full $63k comes off the loan making the actual “loss” $50,160. </I> This is not the way it works. Interest paid does not come of the principal amount. The defective loan should be made whole either via cash payment or a substitute loan. So of the monthly payments made the loan would only be reduced by the principal repayments made. On a mortgage loan in the early years it is not going to be that significant. I agree that actual losses to BAC are a fraction of the original loan amount but the author is incorrectly reducing the exposure by the amount of interest payments made. Agree with the rest of the article. Thanks Vinod Link to comment Share on other sites More sharing options...
biaggio Posted September 22, 2011 Share Posted September 22, 2011 Thanks Rabbitisrich and Vinod Link to comment Share on other sites More sharing options...
rranjan Posted September 22, 2011 Share Posted September 22, 2011 This is not the way it works. Interest paid does not come of the principal amount. The defective loan should be made whole either via cash payment or a substitute loan. So of the monthly payments made the loan would only be reduced by the principal repayments made. On a mortgage loan in the early years it is not going to be that significant. I agree that actual losses to BAC are a fraction of the original loan amount but the author is incorrectly reducing the exposure by the amount of interest payments made. Agree with the rest of the article. Thanks Vinod That's the first thought came in my mind while reading it. I thought some investors might have special claws which might make author claim plausible but that should not be the norm. I am not even sure if any mortgage originator will agree to these terms but then again stranger things have heppened in past in this industry. Link to comment Share on other sites More sharing options...
tooskinneejs Posted September 23, 2011 Share Posted September 23, 2011 Dallas County (and maybe other counties to follow) wants BAC to pay back-filing fees for unrecorded loan assignments that went through the MERS system... http://www.bloomberg.com/news/2011-09-22/bank-of-america-filing-fee-case-may-open-new-front-in-mortgage-lawsuits.html Link to comment Share on other sites More sharing options...
Grenville Posted September 28, 2011 Share Posted September 28, 2011 Any thoughts on this lawsuit in regards to the Merrill Acq and the lack of disclosure about losses. It seems to have more teeth and require a much larger settlement. "A $50 Billion Claim of Havoc Looms for Bank of America" http://www.cnbc.com/id/44700101 Link to comment Share on other sites More sharing options...
merkhet Posted September 28, 2011 Share Posted September 28, 2011 Any thoughts on this lawsuit in regards to the Merrill Acq and the lack of disclosure about losses. It seems to have more teeth and require a much larger settlement. "A $50 Billion Claim of Havoc Looms for Bank of America" http://www.cnbc.com/id/44700101 It's been a while since my law days, but it seems to me that there's a big leap between "losses should have disclosed" vs. "damages of $50 billion." I'm pretty sure it's not strict liability in this case -- assuming that the $15 billion of losses were known AND disclosed, was there evidence that shareholders would have voted in favor anyway? (I'm a bit out of my depth here law-wise, so I'd love if someone with more securities law experience would step in...) Link to comment Share on other sites More sharing options...
benchmark Posted September 29, 2011 Share Posted September 29, 2011 How does the warrant compare with Jan 13, 10 leap? it seems to me that the leap at 0.8 offers more upside in a year than warrant. You can easily double your money in a year. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted September 29, 2011 Share Posted September 29, 2011 How does the warrant compare with Jan 13, 10 leap? it seems to me that the leap at 0.8 offers more upside in a year than warrant. You can easily double your money in a year. or you can lose your entire investment in a year. the warrant buys time, which is something that could be extremely valuable as the "turn" is taking way way longer than many expected. By "entire investment", keep in mind that the LEAP trades for 28% of the price of a class A warrant. Using this terminology, you can lose more than your entire investment if the warrant declines by more than 28% by the time that LEAP expires. Link to comment Share on other sites More sharing options...
benchmark Posted October 1, 2011 Share Posted October 1, 2011 I guess 'losing all' is a possibility, so far BAC hasn't show any life, even after buffet's investment. Warrant might give you peace of mind, while the leap can give you some quick return that are still long term gain Link to comment Share on other sites More sharing options...
beerbaron Posted October 1, 2011 Share Posted October 1, 2011 I guess 'losing all' is a possibility, so far BAC hasn't show any life, even after buffet's investment. Warrant might give you peace of mind, while the leap can give you some quick return that are still long term gain This is a all or nothing bet, I don't know why anyone would buy the common. Your risk is much higher then 2013 leaps. The next 2 years will define if BAC survives or not. BeerBaron Link to comment Share on other sites More sharing options...
tombgrt Posted October 1, 2011 Share Posted October 1, 2011 I guess 'losing all' is a possibility, so far BAC hasn't show any life, even after buffet's investment. Warrant might give you peace of mind, while the leap can give you some quick return that are still long term gain This is a all or nothing bet, I don't know why anyone would buy the common. Your risk is much higher then 2013 leaps. The next 2 years will define if BAC survives or not. BeerBaron The next two years? I think the leaps expire in January of 2013? That is 15 months. I believe more time will be needed to fix BAC and for it's value to come out. 15 months isn't that much and in the meantime a lot can happen maybe making the leaps almost worthless but the common maintaining their value. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted October 1, 2011 Share Posted October 1, 2011 I took a lot of large cap bank names off the top of my head and plotted them on a chart together. They all seem to go up together and fall together. From the looks of things, BAC would be down at least 30% this year just by virtue of being a bank. I included BAC, C, JPM, STD. STD has about 50% upside based on the past 6 month trading range (the equivalent of BAC going to $9). It yields 11%. I figure if you bought that one along with the BAC $10 strike 2013 calls you have a dividend that will reimburse you for the calls and you have a downside that doesn't include BAC's mortgage risk. Any thoughts on STD's downside risks? I believe they only have a couple of hundred million in greek sovereign risk and their Spain/Portugal exposure is small relative to their size. They have healthy South American exposure in Brazil. I also discovered that they have a program whereby you can elect to have shares distributed to you in lieu of cash dividends -- thus the Spanish government won't withhold tax on the dividend because they only do so on cash dividends. You would then sell the shares once you get them (to manufacture your dividend). What I'm getting at here is finding investments that have enough yield to pay for the $10 strike calls, but also have enough upside to get you enough of a boost to simulate the first leg up (BAC going from $6 to $10). Link to comment Share on other sites More sharing options...
ubuy2wron Posted October 1, 2011 Share Posted October 1, 2011 BAC which I own really needs to dislodge the never ending series of lawsuits. Everyone who has lost money because of the real estate crash is suing BAC. They are being sued by home owners for being to agressive with foreclosures they are being sued by mortgage holders for not being aggressive enough I think that putting Country wide into run-off or bankruptcy may be the only thing that will stop the madness. Link to comment Share on other sites More sharing options...
benchmark Posted October 1, 2011 Share Posted October 1, 2011 I guess 'losing all' is a possibility, so far BAC hasn't show any life, even after buffet's investment. Warrant might give you peace of mind, while the leap can give you some quick return that are still long term gain This is a all or nothing bet, I don't know why anyone would buy the common. Your risk is much higher then 2013 leaps. The next 2 years will define if BAC survives or not. BeerBaron The next two years? I think the leaps expire in January of 2013? That is 15 months. I believe more time will be needed to fix BAC and for it's value to come out. 15 months isn't that much and in the meantime a lot can happen maybe making the leaps almost worthless but the common maintaining their value. The all-or-nothing aspect is a bit scary, though BAC could easily go to 12-15 if Europe stables itself (which I think it will, after letting greece/spain go), and they put country wide into Bk Link to comment Share on other sites More sharing options...
BargainValueHunter Posted October 1, 2011 Share Posted October 1, 2011 My gut feeling is that we are closer to another March 6, 2009 than another September 15, 2008... Link to comment Share on other sites More sharing options...
PLynchJr Posted October 3, 2011 Share Posted October 3, 2011 Wow. New 52 week low. Down to $5.87. Anyone buying more? Link to comment Share on other sites More sharing options...
tombgrt Posted October 3, 2011 Share Posted October 3, 2011 Well, I'm glad I don't have any leverage but it sure is tempting. Link to comment Share on other sites More sharing options...
tombgrt Posted October 3, 2011 Share Posted October 3, 2011 Bought some common just now. Crazy! Falling knife but the fear is beyond absurd. Link to comment Share on other sites More sharing options...
NormR Posted October 3, 2011 Share Posted October 3, 2011 When do higher margin requirements hit. $5 or $3? I keep forgetting (good thing I don't use leverage) ... Link to comment Share on other sites More sharing options...
ERICOPOLY Posted October 3, 2011 Share Posted October 3, 2011 When do higher margin requirements hit. $5 or $3? I keep forgetting (good thing I don't use leverage) ... I think it is $3. Perhaps Citigroup's decision to reverse split wasn't so useless. Link to comment Share on other sites More sharing options...
biaggio Posted October 3, 2011 Share Posted October 3, 2011 a lot of companies (pensions + mutual funds) not allowed to hold stock <$5 in price, so can we expect further downside if price crosses $5 ? Link to comment Share on other sites More sharing options...
ubuy2wron Posted October 13, 2011 Share Posted October 13, 2011 Has there been any discussions anywhere about the spin off of Merrill Lynch given the Volker Rule. Should GS and Morgan Stanley give up their bank charters in a Glass Steagal? lite future. Link to comment Share on other sites More sharing options...
sswan11 Posted October 15, 2011 Share Posted October 15, 2011 Barron's: Buy the banks http://online.barrons.com/article/barrons_cover.html#articleTabs_panel_article%3D1 Warrants or common? Link to comment Share on other sites More sharing options...
Mephistopheles Posted October 18, 2011 Share Posted October 18, 2011 Hi, Can anyone recommend a broker through which I can buy these warrants? Currently I am using Merrill Edge, which is crap, but I get free trading and so I use it. I don't think I am able to buy the warrants through it, unless I am mistaken. So through what brokers have you all bought the warrants? Thank you! Link to comment Share on other sites More sharing options...
claphands22 Posted October 18, 2011 Share Posted October 18, 2011 I'm guessing you should be able to buy them through Merril Edge. The stock ticker is different depending on what brokerage you are using. I would call them up to see what the ticker is for their system. Link to comment Share on other sites More sharing options...
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