Subprime Woes Beset Bank of America
The subprime crisis keeps singing the blues for Bank of America.
Reportedly the company may take a record $6.5 billion provision in the first quarter of 2008 to cover possible future losses in its subprime mortgage portfolio and home equity portfolio, according to analyst Richard Bove.
Predictions of continuing troubles for both of these market segments have been widely forecast in the media lately. An article in Business Week titled “The Home Equity Crisis Ahead†detailed the deterioration of the $850 billion home equity market in January with Amy Crews Cutter, deputy chief economist at Freddie Mac, quoted as saying: “The home-equity lender is going to get hosed.â€
Similar opinions were touted by Princeton economist Paul Krugman, in the March 31, 2008, issue of Fortune magazine. Specifically, Krugman said: “I think there’ll be $1 trillion of losses on mortgage–backed securities showing up somewhere.†(For the record, securities firms and banks have thus far disclosed about $195 billion in losses related to the mortgage markets.)
Meanwhile, whether Bank of America’s two portfolios experience the level of losses it expects to put aside remains to be seen. It’s all contingent on the economy and developments in the housing markets, Bove says.Â
Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage related investment losses.
