But what about Countrywide?
“A decision was made; I wasn’t running the company,” Mr. Moynihan says, although he was obviously a top bank official at the time. “Our company bought it and we’ll stand up; we’ll clean it up.”
Countrywide has already cost Bank of America more than $5 billion in write-offs. But Mr. Moynihan might be the last man standing when it comes to defending the merits of the deal.
“When we get through the work on the management side, people will come to the same conclusion that this is a great thing for customers and a great thing for the bank,” he says. “Right now, we’re still absorbing the body blows.”
There’s no sign that those body blows will stop anytime soon. Nearly all of Bank of America’s subprime mortgage portfolio was inherited from Countrywide, whose risky lending typified the giddy years before the housing bubble burst.
Countrywide also saddled Bank of America with many more homeowners in default than its system could possibly handle. The overload contributed heavily to the consumer abuses and dubious legal practices that led it to halt foreclosures across the country in October, after the news media, courts and regulators began questioning the bank’s operations.
Mr. Moynihan remains reluctant to yield much ground on Bank of America’s foreclosure practices, however.
“At the end of the day, we could have done better. I’ll take constructive criticism,” he says, especially on delays as the caseload exploded. Still, with the number of workers focusing on defaults set to hit 30,000 by early next year — triple what the bank had two years ago — he says he’s “satisfied that we are doing everything we can and that we’ve caught up and are working through the backlog.”
“This is a very, very difficult process,” he adds. “People want to pay us their debt, but they’re sick, they’ve lost their job, they’ve lost their income. It’s a very tough scenario to have a good outcome for anybody.”
In-house mortgage modifications, the process in which the terms of a loan are eased so homeowners have a chance to catch up, have been a source of contention between the banking industry and its critics.
Mr. Moynihan points out that the scale of Bank of America’s modification efforts far exceeds those of his competitors — 725,000 modifications since January 2008 — and is expanding fast. He says the rate of monthly modifications jumped to 22,400 in November from 12,700 in September.
“I feel proud of what we’ve done,” he says. “You never want to have a customer feel something wasn’t done right.”
But with more than 1.3 million of its customers still behind on their mortgage payments, even tens of thousand of modifications a month still represents a small portion of the loans.
Other numbers also tell a less rosy story. For homeowners who failed to get a permanent modification under the federal government’s Home Affordable Modification Program, only 14 percent managed to get an alternative in-house modification at Bank of America, compared with 31 percent at JPMorgan Chase, 27 percent at Citibank and 40 percent at Wells Fargo .
And of the 425,000 homeowners serviced by Bank of America estimated to be eligible for the program at the end of September, only 0.7 percent began trial modifications in October, according to federal data. That compares with 2.4 percent at JPMorgan Chase, 1 percent at Citibank and 1.6 percent at Wells Fargo.
“Bank of America has just had a culture of being more reluctant to make concessions as part of the modification process,” said Alan White, associate professor of law at Valparaiso University in Indiana. “It’s improving slowly, but they continue to lag their peers.”
Bank of America says that the government’s modification program is a limited benchmark for measuring its progress, and its overall record on modifications is hampered by Countrywide’s subprime-heavy portfolio.
While the bank may be making progress, the overall picture Mr. Moynihan paints still doesn’t reflect reality, says Rachel Bloch, a foreclosure prevention advocate at Empowering and Strengthening Ohio’s People, a Cleveland community organization that helps borrowers with troubled mortgages stay in their homes.
“I’ve been working with Bank of America for three years now, and it’s been a really hard process,” she says. “I have homeowners waiting for a year just to get an update, let alone a resolution.” Over and over again, she said, the paperwork sent in by borrowers is lost, causing further delays, while fees and penalties accumulate.
It’s a problem cited by other consumer advocates and homeowners like Dorothy Robinson of San Jose, Calif. Ms. Robinson, 66, has been trying to get a modification from Bank of America on her $476,000 mortgage for the last two years, ever since her husband lost his job.
But dealing with customer service has been incredibly frustrating, she says, with one bank representative telling her she’d been denied, another saying the modification had been approved, and both of them repeatedly asking for documents she’d already sent in. And when Ms. Robinson withdrew money from her retirement account to try to get caught up, it took months for Bank of America to even record the payment, she says.
“I have to get this resolved. I need a roof over my head,” says Ms. Robinson. “I don’t know what’s happening.”
Bank of America says Ms. Robinson has been conditionally approved for a modification under the government program, including a principal reduction. More information is still needed from Ms. Robinson to confirm final eligibility for the modification, the bank says, while denying that there is any systematic problem causing documents to be lost.
BAD as the foreclosure mess has been for Bank of America’s reputation, Wall Street analysts say a bigger financial threat is looming: what if Bank of America and other giants are forced to buy back a portion of the hundreds of billions in mortgages gone bad?
A growing number of investors are arguing that because the mortgages may have been originated fraudulently, or sliced into mortgage-backed securities without adequate due diligence, the banks are obligated to buy them back under the original terms of the securities — a process known as a putback.
Legal barriers to putbacks are high, but the sheer amount of mortgages originated, securitized and sold to all investors by Bank of America and Countrywide is staggering — $2.1 trillion from 2004 to 2008.
So even if only a small portion are put back, some analysts argue, the losses for banks could run into the tens of billions. This is one issue on which Mr. Moynihan and Charles H. Noski, the chief financial officer, have made a more forceful case that the risk is “manageable,” promising “hand-to-hand combat” in the courts on a loan-by-loan basis if putbacks start cascading in.
But analysts like Mr. Mayo cite fear of putbacks as one reason Bank of America’s stock has lagged behind its main rivals. “People are worried about a $35 billion hit,” Mr. Mayo says. “That may be wrong, but they haven’t convinced people otherwise.”
Mr. Moynihan is unbowed. “We signed up for the task, and we’ll clean it up,” he says. “We’re working our tails off.”