Bank of America reports loss due to mortgage problems

Reporting an $8.8 billion loss in the second quarter, Bank of America has had to pay substantial settlements due to legal problems in its mortgage division.

Analysts predicted the reported loss, despite the bank enjoying a $3.1 billion profit during the second quarter of 2010, The New York Times reported. But this year, the bank agreed to an $8.5 billion settlement to more than 20 investors who purchased failed mortgage investments. And the bank set aside $5.5 billion this past quarter for future settlements associated with problematic loans, as well as $6.4 billion for other charges, totalling up $20 billion in mortgage-related losses.

Had it not been for the mortgage problems, the bank would have reported a $3.7 billion gain for the quarter, an increase from last year, said Brian T. Moynihand, the bank's chief executive.

"Obviously, the solid performance in our underlying business continues to be clouded by the costs we are absorbing from our legacy mortgage issues," he said.

The Wall Street Journal reported that Bank of America's second quarter total credit-loss provisions were $3.3 billion down from $8.11 billion last year, and credit-card operations nearly tripled to $2.04 billion. But the new debit card rules will reduce that revenue for the fourth quarter, chief financial officer, Bruce Thompson, told the news source.

Jason Goldberg, analyst for Barclays Capital, told The New York Times that Bank of America made strides with the $8.5 million settlement, but it still has pending lawsuits by mortgage insurers and private mortgage investors. While JPMorgan and Citigroup reported growth in the second quarter, Bank of America continues to see losses due to its mortgage problems, Goldberg said.  

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