The $25 billion foreclosure agreement between big banks and state attorneys general marks a turning point for lenders, including Charlotte's Bank of America Corp., looking to move beyond their mortgage woes, some industry experts say.
But others worry there are more losses and legal troubles to come for the finance sector. And they said the long-awaited deal announced Thursday might not do much to boost stock prices, bolster earnings or blot out troubles that have plagued top banks since the housing market collapsed.
"This is just the beginning in a series of attacks to be made against the banking industry for their mortgage practices and other issues," analyst Dick Bove of Rochdale Securities said Friday.
The settlement with Bank of America, Wells Fargo & Co., Citigroup Inc., JPMorgan Chase & Co. and Ally Financial Inc. does not absolve the lenders of liability for other types of claims, including those targeting the packaging of loans into complex securities. It also leaves the door open for potential criminal charges related to the banks' handling of mortgages.
Massachusetts' securities regulator on Friday subpoenaed Bank of America regarding two bundles of loans that resulted in $150 million in losses for investors, for instance. A day earlier, federal regulators planned to warn several major banks that they intend to sue them over mortgage-related actions, the Wall Street Journal reported, citing sources familiar with the situation.
President Barack Obama has established a new financial crimes unit to investigate mortgage fraud, and state attorneys general said Thursday, as they announced the multibillion-dollar agreement, that they would continue to look into bank practices, signaling lenders' mortgage troubles aren't yet behind them.
The question of what comes next is particularly important for Bank of America, which continues to face challenges stemming from its 2008 acquisition of struggling mortgage lender Countrywide Financial Corp.
In the months leading up to the attorneys general settlement, some insiders and analysts said the deal would prove a watershed moment for the nation's second-largest bank by assets. Chief executive Brian Moynihan said during a conference call with analysts last month that the settlement, combined with overall improvement in the housing market, could spur a quicker resolution of other mortgage-related troubles.
And former CEO Hugh McColl Jr. told the Observer in an interview recently that the deal would "remove a huge amount of doubt from the industry."
Bank spokesman Dan Frahm declined to comment Friday on what executives expect to result from the settlement in the months ahead, but he said the agreement will help homeowners, bring more certainty to the housing market and further the bank's ongoing efforts to help "get the housing market back on track."
Others said that the settlement is a significant step forward but that it's not enough to quell investors' concerns.
Jon Finger, a partner in the Houston investment firm Finger Interests Ltd., a major Bank of America investor, said he understands the bank's desire to get the settlement behind it and improve relations with government officials. But he was surprised by the share of the $25 billion Bank of America had to bear - about $11.8 billion, the most of the five servicers.
"Obviously they're picking up a good deal of Countrywide's liability," said Finger, whose firm also owns shares of Citigroup and JPMorgan Chase. "I have to question whether management and the board are being careful in protecting the interest of shareholders."
He wants to see bank leaders thoroughly investigate options that might help limit liability from the Countrywide acquisition, including sending that unit into bankruptcy, he said. He also questioned whether the bank has set aside all the money it needs for the settlement.
Bank of America has said the reserves it set aside in 2011 will be enough to cover its part.
Analyst Nancy Bush, a contributing editor at SNL Financial, said there are other considerations as the deal plays out, though, including whether banks have the staff and other resources in place to implement new requirements.
It's likely banks have already taken at least some of those steps, "but you never know," she said. "There are so many details in this thing that I have to wonder if everybody even knows at this point."
Bush also wonders what to make of the new level of control states will have over national banks, she said.
"From a practical standpoint, you can't have 50 different regulators of a bank," she said. "Does this now start to splinter regulation of the banks? If so ... it's a nightmare."
Guggenheim Securities analyst Marty Mosby said Friday that he doesn't anticipate any material financial impact for Bank of America or Wells Fargo, the San Francisco bank that bought Charlotte's Wachovia in 2008, in coming quarters. But he said the deal highlights a key difference between the rivals, citing the fact that Bank of America's contribution to the settlement is about twice that of Wells Fargo's $5.3 billion.
"We believe this reflects WFC's quality underwriting and attention to risk management processes as compared to Countrywide's originations, which were not regulated," he said in a research note. "We believe as this process moves forward, the gap between BAC's losses and WFC's will likely widen even further."
Going forward, other challenges remain for the Charlotte bank.
Moynihan still faces questions about his leadership and how he will rebuild the bank's public image, which took a hit last year after a series of public-relations missteps. And Bank of America shares, which slid nearly 60 percent in 2011, remain well below their pre-recession levels.
The bank's stock didn't move significantly after the foreclosure settlement, inching up Thursday before closing at $8.07 Friday, down about 1 percent from the previous day's close.
But the stock has rallied recently, climbing 45 percent so far this year. And some said this week's foreclosure agreement represents one fewer roadblock along the path to restoring shareholders' wealth.
"The more uncertainty that gets removed," said Finger, the Houston investor, "the higher the stock price can go."
