Bank Of America Says Half Of Its Mortgages Are “Bad”
That’s right. Half.
Bank of America Corp. is segregating almost half its 13.9 million mortgages into a “bad” bank comprised of its riskiest and worst-performing “legacy” loans, Bloomberg News reported, citing Terry Laughlin, who is running the new unit.
“We are creating a classic good bank, bad bank structure,” Laughlin told investors at a meeting in New York Tuesday, according to Bloomberg. He was promoted last month to manage the costs of resolving disputes stemming from the company’s 2008 purchase of Countrywide Financial Corp. “We’re going to get after this, we’re going to do it the right way and we’re going to put it to bed in the next 36 months,” he said.
Bank of America, of course, took over Countrywide Financial (of the infamous VIP loan fame) which was the largest originator of subprime loans in the nation.
The politicians have been fighting desperately to keep foreclosures at bay, but it may be high time to admit that they’re inevitable. The government gave banks incentive to make “bad” loans to people who had no business getting those loans in order to promote an “ownership society.”
Short of paying these people’s mortgages for them, there’s nothing we can do but let the banks foreclose on those who can’t pay and let the market adjust itself. Whatever political fantasies we may be fond of perpetuating, the basic rules of the market must apply. Those who take out loans must pay them back.Tags: bank of america, mortgages, subprime loans