Bank Of America Lied To Homeowners And Encouraged Foreclosures, Former Workers Allege (BAC)

$('.icon-tooltip').tooltip();(Reuters) - Six former Bank of America Corp employees have alleged that the bank deliberately denied eligible home owners loan modifications and lied to them about the status of their mortgage payments and documents.

The bank allegedly used these tactics to shepherd homeowners into foreclosure, as well as in-house loan modifications. Both yielded the bank more profits than the government-sponsored Home Affordable Modification Program, according to documents recently filed as part of a lawsuit in Massachusetts federal court.

The former employees, who worked at Bank of America centers throughout the United States, said the bank rewarded customer service representatives who foreclosed on homes with cash bonuses and gift cards to retail stores such as Target Corp and Bed Bath & Beyond Inc.

For example, an employee who placed 10 or more accounts into foreclosure a month could get a $500 bonus. At the same time, the bank punished those who did not make the numbers or objected to its tactics with discipline, including firing.

About twice a month, the bank cleaned out its HAMP backlog in an operation called "blitz," where it declined thousands of loan modification requests just because the documents were more than 60 months old, the court documents say.

The testimony from the former employees also alleges the bank falsified information it gave the government, saying it had given out HAMP loan modifications when it had not.

Rick Simon, a Bank of America Home Loans spokesman, said the bank had successfully completed more modifications than any other servicer under HAMP.

"We continue to demonstrate our commitment to assisting customers who are at risk of foreclosure and, at best, these attorneys are painting a false picture of the bank's practices and the dedication of our employees," Simon said in a email, adding the declarations were "rife with factual inaccuracies."

Borrowers filed the civil case against Bank of America in 2010 and are now seeking class certification. The affidavits, dated June 7, are the latest accusations over the mishandling of mortgage modifications by some top U.S. banks.

Mortgage problems have dogged Bank of America since its disastrous purchase of Countrywide Financial in 2008. The bank paid $42 billion to settle credit crisis and mortgage-related litigation between 2010 and 2012, according to SNL Financial.

Bank of America and four other banks reached a $25 billion landmark settlement with regulators in 2012, following a scandal in late 2010 when it was revealed employees "robo signed" documents without verifying them as is required by law.

But problems have persisted. Since 2012, more than 18,000 homeowners have filed complaints about Bank of America with the Consumer Financial Protection Bureau, a new agency created to help protect consumers. Recently, the attorney generals of New York and Florida accused Bank of America of violating the terms of last year's settlement.

The government created HAMP in 2009 in response to the foreclosure epidemic and to encourage banks to give homeowners loan modifications, allowing some borrowers to stay in their homes.

THE BLITZ

The court documents paint a picture of customer service operations where managers roamed the floor with headsets, able to listen into any call without warning. Service representatives were told to lie to homeowners, telling them their paperwork and payments had not been received, when in reality they had.

"This is exactly what's been happening to homeowners for years," said Danielle Kelley, a foreclosure defense lawyer in Florida. "No matter how many times they send in their paperwork, or how often they make their payments, they simply can't get loan modifications. They wind up in foreclosure instead."

The former employees said they were told to falsify electronic records and string homeowners along in foreclosure as long as possible. The problem was exacerbated because the bank did not have enough employees handling modifications, adding to the backlog of cases purged during the "blitz" operations.

Once a HAMP application was delayed or rejected, Bank of America would offer an in-house alternative, charging as high as 5 percent when the loan could have been modified for 2 percent under HAMP, according to an affidavit by William Wilson, who worked at the bank's Charlotte, North Carolina office.

Wilson, who was a case management team manager, said he told his supervisors the practices were "ridiculous" and "immoral." He said he was fired in August 2012.

Bank of America said it was not at liberty to discuss personnel matters.

(Reporting By Michelle Conlin and Peter Rudegeair in New York; Editing by Paritosh Bansal)

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Everything Bill Gross Recommended At Barron's January Roundtable Has Lost Money

CNBC

Goldman Sachs' Abby Joseph Cohen

Despite elevated volatility in recent weeks, the stock market has rewarded investors who embraced risk in the U.S. since the beginning of the year.

Today, Barron's published a report card on the investment recommendations made at its January roundtable.

And it's worth noting that of the panelists, only PIMCO's Bill Gross saw all of his recommendations lose value.

In case you forgot, Goldman Sachs' Abby Joseph Cohen came out bullish during the roundtable, but Gross fired back calling her forecasts "not only extreme but almost farcical."

But only one of Cohen's picks is out of the money.

Now, most of the roundtable panelists make clear that their recommendations aren't intended to be short-term trading vehicles. And it's far too early to declare one a winner and the other a loser.

But for now, one's a bigger winner while the other's a bigger loser.

Here's a tally of Gross' picks' total returns via Barron's:

SPDR Gold Trust: -15.2%Pimco Total Return: -0.2%BlackRock Build America Bond Trust: -5.4%Pimco Corporate & Income Opportunity: -2.6%

And here are Cohen's:

Bristol-Myers Squibb: +38.7%Mosaic Company: +1.3%Expeditors International of Washington: -9.6%Hankook Tire Worldwide: +2.4%Noble Energy: +9.2%

Read the roundtable participants' midyear update at Barrons.com.

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Everybody's Paying Fat Cash Dividends These Days

Dividends have accounted for over 40% of total returns for stock market investors since 1930.

Oppenheimer's John Stoltzfus and Matt Naidorf argue that dividend considerations should be a "central component of the investment process."

In a recent report to clients, the analysts note that it's a mistake to assume that only mature non-cyclical companies pay dividends.

"Of the 500 current members belonging to the S&P 500 index, 411 currently pay a regular dividend (82.20%)," wrote Stoltzfus. "Even smallcap companies, which are traditionally viewed as incipient firms in high growth areas, often pay dividends. Among the 1,978 current members of the Russell 2000 Smallcap Index, 41.15% currently pay regular dividends."

It used to be that tech companies were not known for paying dividends because they were too busy reinvesting any extra cash into growth projects.

But that no longer is the case.

"Investors might be surprised to see that 64.29% of information technology companies pay a regular dividends, and among those payers the current average yield is 2.27%—higher than the comparable yield for all other cyclical sectors and even higher than healthcare, a classic defensive," said Stoltzfus.

Here's a sector by sector breakdown of dividend profiles based on recent data.

Oppenheimer

 Check out the rise of dividends as the stock market fluctuated.

"The ten-year inflation-adjusted CAGR (compound annual growth rate) of dividends paid by the index is 4.33%," Stoltzfus added.

Oppenheimer

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The 'Great Shrinkage' Has Been A Much Bigger Stock Market Story Than The 'Great Rotation'

Companies have been buying back stock like crazy lately.

Some are even taking advantage of cheap credit to finance  buybacks with borrowed money.

Of course, many investors would rather see extra cash reinvested for growth.

But with limited opportunities in this slow growth environment and low returns on cash in this low interest rate environment, buybacks have been one of the favored methods for returning wealth to shareholders.

With so many companies announcing they would engage in this practice, Deutsche Bank's David Bianco thinks the downside risk to owning stocks in the near-term could be limited.

"Robust 1Q buybacks and large authorization reloads suggest 2013 weighted average shares decline 1.5-2%," wrote Bianco in a June 9 note to clients. "However, buybacks should be sensitive to share prices. Repurchases at high prices can destroy value. We expect buybacks to limit the downside of any summer dips, but if they lead the market higher it will raise autumn risk."

Here's more color on buybacks from Bianco:

Shares shrink less than net dollars spent on buybacks of market cap because companies buy shares at higher prices than issued via employee stock option programs and rising stock prices put past option grants further into the money.

Buybacks have clearly been the dominant source of inflows into the equity market this year and last. We have always viewed the prospects of a great shrinkage more promising than a great rotation. There is little evidence of monthly QE sums directly leading to equity buying albeit depressed interest rates have helped dividend paying stocks attract income starved investors. Provided long-term interest rates don’t rise too much there should be a healthy bid for equities from both corporate and ordinary investors.

Indeed, the "great rotation" – the idea that investors would dump bonds for stocks – may go down as one of the more overrated and misunderstood ideas in the market.

Here's a chart of buyback announcements and actual buybacks by S&P 500 companies:

Deutsche Bank

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Credit Suisse Created An 'Asset Bubble Evaluator' Index In Honor Of The Prime Minister Of Japan

Credit Suisse / The Financialist

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HERE IT IS: SocGen's Famous Chart With The Black Swans

The analysts at Societe Generale published their latest quarterly Global Economic Outlook report this week.

As usual, it includes an update to their chart of black swan risks. These are the unlikely events that could rock the economy and financial markets.

"On balance, risks to our Global Economic Outlook remain biased to the downside," they write.  "Feedback loops from markets to the real economy (as opposed to the other direction) feature more prominently in our new Swan Chart, highlighting the major risk factors."

Societe Generale

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3 Energizing Small-Cap Picks

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