Bank of America Corp (NYSE: BAC), the nation’s largest bank, has been battered by lawsuits during the past two years and there does not appear to be an end in sight. Yesterday, one more has been added to the mix. A group of shareholders filed suit against the firm over its foreclosure paperwork practice in the N.Y. State Supreme Court in Manhattan.
According to Bloomberg, the suit alleges that the Charlotte based bank “did not properly record many of its mortgages when originated or acquired, which severely complicated the foreclosure process when it became necessary.” Further, the shareholders contend that the bank concealed the fact that their staffing was insufficient to process the huge volume of foreclosed loans in its portfolio.
The shareholders say the mortgage problems contributed to a 42 percent decline in stock price after the problems were disclosed. The shares were trading at $19.48 on April 15 and bottomed in late November at $11.16. After freezing foreclosures on October 2 of 2010, the bank restarted foreclosures soon thereafter following an internal review. The suit accuses the bank’s leadership of breaching fiduciary duty, wasting corporate assets and mismanagement, according to Bloomberg.
This lawsuit is just the latest development in the wave of litigation they have faces since the foreclosure crisis began. Following their purchase of Countrywide Financial Corp in 2008, Bank of America quickly became prominent in the mortgage industry, and had to divert thousands of employees to work with distressed homeowners and bad mortgage loans. BofA has also written off billions of dollars in mortgage-related assets, and faces requests from investors asking the bank to buy back soured mortgage securities. BofA is prepared for legal expenses this year up to $1.5 billion, a stinging number considering that the firm’s dividend plan was recently shot down and following a $3.6 billion loss in 2010.
While major competitors like Citigroup (NYSE: C) and JPMorgan Chase (NYSE: JPM) have been able to largely avoid the fray of the mortgage meltdown, Bank of America seems to sit at the center. Facing mounting legal fees and losing investor confidence, Chief Executive Officer Brian Moynihan is going to have his work cut out for him. Integrating the Dodd Frank financial regulatory reform will further dampen revenues and prop trading is shut down along with the myriad of fees the bank had been used to charging its customers. The firm’s proposal to increase dividends were promptly shot down by regulators, leading to further shareholder unrest in the coming months.