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Bank of America Shares Pummeled Again

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It's another rough day for Bank of America.

Shares were down more than 6 percent in early trading, making it one of the worst performers on the Dow Jones Industrial Average.

With the S&P 500 and Dow industrials basically flat for the day, and financials as a whole down just a bit, many are asking why Bank of America is getting so beaten down.

There's barely been any news since last week. Wells Fargo analysts cut their price target. Susquehanna analysts recommended buying the stock.

"I suspect that BofA, that plaything of high-frequency traders, may be a canary in the market coalmine, a sign that the rebound this morning is a bit of a dead-cat bounce. In fact, it’s fading even as we speak," Mark Gongloff of MarketBeat writes.

Mark notes that Bank of America's credit-default swap spreads are widening, far beyond anything seen in rivals such as Citigroup or JPMorgan Chase .

If I had to guess, I'd say that the news about the spike in mortgage delinquencies is probably feeding today's sell off.

The Mortgage Bankers Association's Mortgage Deliquency Survey was released today, and it showed a clear end to the improvement in mortgage performance. The second-quarter mortgage delinquency rate rose to 8.44 percent of all mortgage loans outstanding.

What a lot of investors looking at this space tell me is that Bank of America has become a proxy for mortgage performance. Bank of America was the second largest mortgage lender in 2009, behind Wells Fargo. Its volume was up 116 percent over the previous year.

Meanwhile,Citigroup and JPMorgan were pulling back, allowing the size of their mortgage business to shrink. If post-housing bubble loans are starting to sour, then Bank of America could be in for a lot of trouble.

Very few people seem to have paid much attention to what I consider to be mortgage bubble of 2009. The mortgage volume was gigantic that year, thanks in part to things such as the homebuyer tax credit. Around $2 trillion of home loans were made in 2009, the majority of them by the largest banks. That’s not really that far behind 2007’s volume of $2.4 trillion, although back then the independent mortgage companies were playing a much larger role.

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