(Bloomberg News) Bank of America Corp., the largest U.S. mortgage servicer, may pay as much as $3.69 billion or as little as $890 million to settle a probe of its practices, Nomura Securities International Inc. analysts estimated.
The upper estimate is based on the 14 biggest servicers agreeing to a $10 billion penalty in a deal tied to the number of loans in foreclosure, Glenn Schorr and Brian Foran wrote today in a report. The Charlotte, North Carolina-based bank may pay the lesser amount in a $3 billion group settlement based on the size of servicing portfolios, they wrote.
State and federal officials investigating mortgage practices had offered revised terms during settlement talks in Washington, including a proposal for banks to fund principal writedowns for homeowners. The five largest banks proposed paying $5 billion to settle the probe, two people familiar with the matter said yesterday.
"An amount in that range would be viewed as a positive for the banks, given larger numbers have been referenced previously," the analysts wrote. Regulators had previously suggested a $20 billion penalty.
Bank of America would pay the most among the 14 largest servicers under both settlement scenarios, the analysts wrote.
Bank of America Chief Executive Officer Brian T. Moynihan told shareholders today the mortgage unit "still struggles mightily." Refunds and settlements tied to defective home loans dragged down first-quarter profit 36 percent to $2.05 billion. The nation's housing market faces "enormous challenges," Moynihan said at the annual meeting in Charlotte.
Wells Fargo & Co. may pay as much as $2.52 billion and JPMorgan Chase & Co. $1.64 billion if the funds are tied to portfolio size, according to the report. If the amount is tied to foreclosed homes, JPMorgan may pay as much as $2.64 billion with Wells Fargo handing over $1.65 billion, the analysts wrote.