BAC-WT - Bank of America Warrants

[PlanMaestro]

Do you honestly think those are agruments are going to be used in court?

 

They are being used in court, check the MBIA presentation, not that I agree with them.

[MYDemaray]

Kraven -- I think we are talking past one another a bit.  I am not concerned with the MBIA suit.  I am concerned with its knock-on effects. Specifically as follows:

 

#1.) MBIA wins Article 77 -> #2.) 8.5bn security holders settlement is rejected -> #3.) BAC now on the hook for "multiples of $16.3 bn" reserves due to new suits from private security holders who are not bound by the settlement.  This, I believe, is the essence of Mark Palmer's argument, which I'm contemplating.

 

What I am suggesting is that even if 1.) and 2.) occur, that does not necessarily lead to 3.).  Does this make sense?

 

I realize that the reasons enumerated in my prior post are not applicable defenses to #1.)...as you pointed out, but I believe they are applicable in any knock-on private securities litigation that could result in #3.)

 

On this basis, I think Mark Palmer is wrong about BAC's wider liability beyond the MBIA case.

 

Does that make sense?  Forgive me if we are beating a dead horse.

 

The interesting thing here is that this isn't a suit under the pooling and servicing agreement so much as it's an attempt to force BAC (Countrywide) as seller under an outside agreement (the mortgage loan sale agreement) to buyback loans that were in breach of r&w.  So technically this isn't a suit requiring 25% as it isn't under the pooling and servicing agreement.  I have no idea how far that goes, but it's a good argument to me.

[Kraven]

 

My personal view is that BAC has the losing hand here, but as I've said many times who knows what a court will decide.  I have a hard time seeing how BAC out of the spirit of generosity pays out $45 bil or so that it didn't have to.  They said they have done this when they view it as advantageous to the company and the shareholders.  So why do it if they didn't believe they needed to?  A generous spirit? 

 

BAC moved assets from CFC in consideration for $45.3 billion dollars.  CFC had money to payout for it's liabilities.  You make it sound like BAC is making payments on behalf of CFC.  BAC pays the liabilities for BAC.  They are different corporations.  MBIA knows this and are after more money from than CFC can or will payout. 

 

 

No, my view is when they bought Countrywide (assets or otherwise) they intended to get all the "good" that Countrywide was thought to offer.  They expected that the housing crisis would be temporary and then they would roll out a huge mortgage business they rebranded as Bank of America Mortgage or whatever it's called.  I pointed this out in another post a while back.  If they didn't buy the "business" why are Countrywide mortgage holders directed to call a Bank of America phone number?  Why is the business branded as a Bank of America business?  Why can all Countrwide issues for mortgage holders be dealt with at Bank of America branches?  Why do legacy Countrywide employees have Bank of America email addresses?

 

I want to address the questions you raise.  A number of businesses have different subs and the same phone number.  A judge doesn't care if they use the same phone.  Secondly, you can name your business anything you like after you purchase it.  By calling CFC a "Bank of America" business does not cause them to merge.  Third, yes you can do business at any bank branch with various subs that a company owns.  Go to any bank branch and buy insurance or get a credit card and you are dealing with a different sub than the parent.  Lastly, a judge could care less about what email addresses people use, that does not prove successor liabilities by a country mile. 

 

Do you honestly think those are agruments are going to be used in court?

 

I have zero idea what you're babbling about here.  Honestly, I can't even understand your first point.  As to the second point, you couldn't be more wrong.  As to whether there is successor liability a judge will look at facts and circumstances, indicia of substance, not form.  One question is whether BAC viewed themself as the successor to the business.  Using same phone numbers, email addresses, offices, etc is certainly indicia of belief.  Different business entities have different contact information.  It is also important how things are presented to the outside world. 

[Kraven]

Kraven -- I think we are talking past one another a bit.  I am not concerned with the MBIA suit.  I am concerned with its knock-on effects. Specifically as follows:

 

#1.) MBIA wins Article 77 -> #2.) 8.5bn security holders settlement is rejected -> #3.) BAC now on the hook for "multiples of $16.3 bn" reserves due to new suits from private security holders who are not bound by the settlement.  This, I believe, is the essence of Mark Palmer's argument, which I'm contemplating.

 

What I am suggesting is that even if 1.) and 2.) occur, that does not necessarily lead to 3.).  Does this make sense?

 

I realize that the reasons enumerated in my prior post are not applicable defenses to #1.)...as you pointed out, but I believe they are applicable in any knock-on private securities litigation that could result in #3.)

 

On this basis, I think Mark Palmer is wrong about BAC's wider liability beyond the MBIA case.

 

Does that make sense?  Forgive me if we are beating a dead horse.

 

Sorry, I'm totally confused now.  Maybe we are talking past each other.  I am not sure what involvement MBIA has in the Art 77 matter.  I am confused to what you're saying.  Sorry if I'm being dense.  I think Palmer's point is simply if successor liability is judicially determined than all these other cases out there have more of a leg to stand on and potentially deeper pockets than they might have thought before.

[MYDemaray]

I think Palmer's point is simply if successor liability is judicially determined than all these other cases out there have more of a leg to stand on and potentially deeper pockets than they might have thought before.

 

OK understood. I've been conflating two issues.  (hopefully) straightened out now.

[obtuse_investor]

Unusually high trading volume today for the warrants. See attached screenshot.

[kevin4u2]

 

I have zero idea what you're babbling about here.  Honestly, I can't even understand your first point.  As to the second point, you couldn't be more wrong.  As to whether there is successor liability a judge will look at facts and circumstances, indicia of substance, not form.  One question is whether BAC viewed themself as the successor to the business.  Using same phone numbers, email addresses, offices, etc is certainly indicia of belief.  Different business entities have different contact information.  It is also important how things are presented to the outside world.

 

I can see we are not going to get anywhere when you begin with an egocentric response.  Can you help me see where I am wrong?

 

My first point is this.  I work for a company that owns different subsiduaries.  They have the same phone number.  You call the number and you get the same call center.  It doesn't mean a thing.

 

Let me be clear.  I can walk into my bank and deal with the investment subsiduary, the credit card subsiduary, and the insurance subsiduary and I am dealing with three different companies under one roof.  Do you disagree?  Same phone number, address, etc... this doesn't prove a thing regarding successor liability.

 

Limited liability laws exist for a reason, to limit liability.  If all it takes to the same phone number to eliminate that, there are a lot of companies that are screwed.  Why bother having subsiduaries?

 

To prove successor liability the courts are more concern about a shell game used to screw over creditors by not paying adequate consideration when moving assets.  This is true in both NY and Deleware law. 

[Kraven]

 

I have zero idea what you're babbling about here.  Honestly, I can't even understand your first point.  As to the second point, you couldn't be more wrong.  As to whether there is successor liability a judge will look at facts and circumstances, indicia of substance, not form.  One question is whether BAC viewed themself as the successor to the business.  Using same phone numbers, email addresses, offices, etc is certainly indicia of belief.  Different business entities have different contact information.  It is also important how things are presented to the outside world.

 

I can see we are not going to get anywhere when you begin with an egocentric response.  Can you help me see where I am wrong?

 

My first point is this.  I work for a company that owns different subsiduaries.  They have the same phone number.  You call the number and you get the same call center.  It doesn't mean a thing.

 

Let me be clear.  I can walk into my bank and deal with the investment subsiduary, the credit card subsiduary, and the insurance subsiduary and I am dealing with three different companies under one roof.  Do you disagree?  Same phone number, address, etc... this doesn't prove a thing regarding successor liability.

 

Limited liability laws exist for a reason, to limit liability.  If all it takes to the same phone number to eliminate that, there are a lot of companies that are screwed.  Why bother having subsiduaries?

 

To prove successor liability the courts are more concern about a shell game used to screw over creditors by not paying adequate consideration when moving assets.  This is true in both NY and Deleware law.

 

I see. You attack me and I respond by pointing out your flawed reasoning and that is egocentric. There you go. I am not even sure where to begin to respond to you. Your understanding of the law is matched only by your pleasantness. I never said all it takes is having the same phone number to prove successor liability. My point was that the court will look at various things to reach a conclusion. Having the same phone number would be one of many things that could prove that one business is the successor to another. Same with email addresses, business contacts, etc.

[Liberty]

http://www.bloomberg.com/news/2013-01-11/bank-of-america-agrees-to-settlement-of-merrill-claims.html

 

Bank of America Corp. agreed to pay $62.5 million to resolve investor claims that the bank’s directors mishandled the acquisition of Merrill Lynch & Co., company officials said.

 

U.S. District Judge Kevin Castel in New York today approved Bank of America’s offer to add $42.5 million to a $20 million settlement of shareholder lawsuits alleging the bank’s board allowed executives to overpay for Merrill Lynch in 2009. Castell indicated in a Jan. 4 order he had questions about the “fairness, reasonableness and adequacy” of the original accord, according to court filings.

[xazp]

IMO:

 

A)  Virtually all private mortgage litigation (as distinct from MBIA, a mortgage insurer) goes to one judge (Pfaelzer).  This has been true for all the big lawsuits you know about (even thought the plaintiffs fight tooth and nail; they all go to Pfaelzer)  AIG, Allstate, FHA, etc.  And her decisions have been clear.  Post mid-2010 everything federal is beyond the statute of either limitations or repose (possible exception: FHA).  And there is no successor liability.    She has made this ruling several times (allstate, AIG, some german company, etc). 

 

Bransteen is relevant to MBIA and similar mortgage insurers.  Pfaelzer is relevant to private mortgage litigation.  Why analysts and investors seem to largely ignore the actual multiple rulings of the actual judge handling (virtually) all past and future private mortgage litigation against BAC is a big ??? for me.

 

B)  I'm dubious there is a situation in which someone who did not sue (or retain a lawyer) from 2004-2011 could think their expected outcome would be better in 2013+.  It just does not make sense to me.  Time is almost always on the side of the defendant (statute of limitations; witnesses forgetting/losing interest; time value of money; assets moving between parties).  I just don't get how a party would decide Oh I got injured 9 years ago, NOW is the time to start litigating! 

 

 

 

Can someone explain to me why xazp's analysis is incorrect and doesn't apply in this discussion?  That the statute of repose has lapsed on most private security litigation and most pools cannot meet the 25% ownership threshold to do anything about it anyways?

 

Below is xazp's entire post on the matter for reference:

 

I'm the author of the presentation, and I'm glad to see some discussion around it. 

 

To the general question of why didn't I mention 'X,' the reason is I was given 15 minutes to present - it just wasn't enough time to fully discuss a complex topic like BAC. 

 

With respect to a potential rejection of the $8.5Bn settlement, I do not share your view that total costs would go up.  To me, the best document on this topic is the Gibbs & Brun 10/31 filing on behalf of the 'big investors' - the PIMCO/Blackrock/etc group. 

 

This is a quote from their document - these are the would-be plaintiffs.

There are 530 trusts in the settlement... The institutional investors hold 25% of the voting rights in 189 of these trusts.  In all but two of the remaining 341 trusts no group alleges they hold 25% of the voting rights. If the settlement is disapproved these trusts will receive no remedy at all.

 

Because of the 25% bondholder threshold, about 65% of the trusts can't even enter litigation.  In other words, while the $8.5Bn settlement meets or exceeds the "big investor's" expected value for returns via litigation - everyone involved in trusts outside of what they've hit 25%, is basically going to receive zero.  The reason Gibbs & Brun is pushing so hard for the settlement is their investors hold $14Bn of securities in trust where they haven't been able to get the 25% threshold - and those trusts will receive nothing.   

 

And as suggested in my presentation, the alternate path through securities act litigation slammed shut long ago.

[PlanMaestro]

This is going to be fun. As we discussed, BAC is being sued twice over the same thing.

 

AIG sues NY Fed over right to sue Bank of America.

http://www.reuters.com/article/2013/01/12/aig-newyorkfed-bankofamerica-maidenlane-idUSL1E9CC09E20130112

 

According to the complaint, New York Fed officials in December told Bank of America that Maiden Lane II had, by agreeing to buy the securities, assumed from AIG all litigation claims relating to what it bought. AIG said this included more than $7 billion of damages claims against Bank of America.

AIG is not seeking monetary payments in the lawsuit, but wants the court to clarify that the New York-based insurer still has the right to sue issuers of securities in Maiden Lane II.

 

 

[Liberty]

Too bad we can invest in the law firms.

[xazp]

This is fun.  And it may be the tip of the iceberg.  Since we are talking many years since the countrywide securities were issued, it is reasonable to think that they've changed hands over time.  And right now, it's totally unclear who even gets to sue. 

 

In the Maiden Lane case, most (all?) of Maiden Lane has been sold off already.  To banks.  Including BAC.  And those banks sliced and diced those securities, repackaged them, held some & sold some. 

 

Over time I am guessing this has happened to other potential litigants - it's been nearly a decade, so over time those countrywide bonds are being scattered all over. 

 

Maiden Lane was one of the big settlement parties, but they no longer own the bonds.  So, there are now probably fewer trusts that hit the 25% threshold.  This just continues as time goes on with other parties.  It's going to be harder and harder to hit that 25% threshold.  Good luck plaintiffs!

 

 

This is going to be fun. As we discussed, BAC is being sued twice over the same thing.

 

AIG sues NY Fed over right to sue Bank of America.

http://www.reuters.com/article/2013/01/12/aig-newyorkfed-bankofamerica-maidenlane-idUSL1E9CC09E20130112

 

According to the complaint, New York Fed officials in December told Bank of America that Maiden Lane II had, by agreeing to buy the securities, assumed from AIG all litigation claims relating to what it bought. AIG said this included more than $7 billion of damages claims against Bank of America.

AIG is not seeking monetary payments in the lawsuit, but wants the court to clarify that the New York-based insurer still has the right to sue issuers of securities in Maiden Lane II.

[Alekbaylee]

http://www.taipeitimes.com/News/biz/archives/2013/01/13/2003552385

[Uccmal]

xazp, Added to that is the reality that many of the earlier mortgages have been runoff in one form or another, had foreclosure settlements applied, or been separated out and closed off. 

 

Given the original paperwork was sketchy, and it has likely been moved in great big file boxes from one place to the next by all parties, I am also betting parts are getting lost.  Unravelling the whole mess would take decades.  Anyone who has been through one office move, or several can attest that things disappear along the way. 

 

Then there are rising house prices to contend with.  If an underwater mortgage is suddenly above water what exactly are you suing for and what have you lost?  The plaintiffs have to be able to show whay they have lost to get exact settlements, otherwise only an estimate can be done, and has already been done, in nearly all cases now.

 

The best settlement anyone could hope for is a fraction of what they are asking.  The reserves will cover what they need to cover, and all this will wind down to a "routine" level of lawsuits. 

 

IMHO, Everyone is just trying for a last kick at the can. 

[fareastwarriors]

http://professional.wsj.com/article/SB10001424127887324442304578236040027936664.html?mod=WSJ_Heard_LeadStory&mg=reno64-wsj

 

article on us bank leverage ratios

 

 

[Mephistopheles]

Anybody looking at the B warrants? They have barely moved in a year.

[ECCO]

Anybody looking at the B warrants? They have barely moved in a year.

 

 

That could be that the market dont expect the b to be in the money in 6 years? B are pure speculation, not investment.

[racemize]

Anybody looking at the B warrants? They have barely moved in a year.

 

They just seem too speculative for me. The break over in comparison to the A warrants has to be over $40 per share, I would think.

[PlanMaestro]

BofA leads mortgage servicing sell-off

http://www.ft.com/cms/s/0/9fa503bc-5d28-11e2-9508-00144feab49a.html#ixzz2HyY1Auqs

 

New bank capital rules, known as Basel III, cap the value of MSRs that can be used to satisfy the requirements and penalise financial groups that hold excess amounts. Regulators have said that MSRs are not as loss absorbent as traditional types of capital, such as equity.

 

“The large servicers are constrained by Basel III,” says Bill Emerson, chief executive of Quicken Loans, a non-bank mortgage lender. “There’s an opportunity for private capital to get involved in this space whereas in the past it might not have been as attractive.”

 

For the first time, three of the top seven home loan servicers are now non-banks, according to Inside Mortgage Finance. Walter, Nationstar and Ocwen Financial snapped up MSRs from their much larger bank competitors to achieve their improved industry ranking.

 

At the same time some mortgage market participants see even bigger changes for the industry ahead. The US Federal Housing Finance Agency is in the midst of developing new standards for how Fannie Mae and Freddie Mac, the state-controlled mortgage financiers, will pay the companies that service the mortgages they own or guarantee

 

[PlanMaestro]

Even though I disagree with some of the assertions, I like how Christian confronts how the successor liability case is no more about the lawyers.

 

http://mbibaclitigtion.blogspot.mx/2013/01/bank-of-america-successor-liability_13.html

[berkshiremystery]

On the future forward earnings estimates at the later part of this decade of between $2-3 per share and 1/3 of it in future payouts in DPS, I might assume that BAC shareholders get something between $0.66 or even $1 in the best case scenario. But I still would be very, very cautious about the upper range of DPS estimates.

 

 

------

 

1 Reason Bank of America's Earnings Will Be Good

2013-01-14 Fool.com

 

http://www.fool.com/investing/general/2013/01/14/1-reason-bank-of-americas-earnings-will-be-good.aspx

 

------

 

So, how could B of A's earnings be good?

At this point, you're probably wondering why I believe that B of A's earnings could in any way be good. And the answer to this is simple: It's already told us so.

 

In the same press release cited above, B of A concluded by saying (emphasis added): "Taking into account the effects of all the items above, Bank of America expects earnings per share to be modestly positive for the fourth quarter of 2012."

 

Now, while I can appreciate that this may at first not seem like anything to write home about, I urge you to think about it for a second longer. Despite nearly $6 billion in charge-offs, B of A expects its earnings to be positive. And not barely positive, but modestly positive.

 

This is huge, as it's indicative of how profitable B of A will be once all its legacy issues related to the financial crisis are behind it -- which will happen. On an annualized basis, that's between $2 and $3 per share in earnings, suggesting there's significant upside to both its quarterly dividend payout and underlying share price.

 

 

[mankap]

The average analyst estimate is 0.02 now after the Fannie announcement.

I expect earnings to be close to this range.

 

[berkshiremystery]

The average analyst estimate is 0.02 now after the Fannie announcement.

I expect earnings to be close to this range.

 

 

You are fully right about the average consensus of the current $0.02 and the Fannie announcement, as conservatively I also see them there more or less,... but on an excluded bases, if someone takes all the quarterly legacy expenses and charge offs away,... someone might see through the near term mist,... so the hidden improvements should be considered the real gem,... and not the actually unexciting numbers.

[mankap]

My estimate for PTPP is between $4-5 B for 4Q.I think Motley fool has not mentioned positive tax impact that BAC will have in 4Q.