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Th e M Rep o RT | 35 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t ORIGINATION Bofa earnings Weighed down by legal expense And more litigAtion costs Are expected to come. NORTH CAROLINA // Bank of America reported last month a nearly 43 percent decline in second-quarter profits compared to last year thanks to a signifi- cant litigation charge. The bank posted second- quarter net income of $2.3 billion on revenue of $22.0 billion. A year ago, the megabank reported bringing in $4.0 billion. Bank of America CEO Brian Moynihan downplayed the de- cline, insisting the bank is "well positioned for further progress." "The economy continues to strengthen, and our customers and clients are doing more busi- ness with us," Moynihan said. "Among other positive indica- tors, consumers are spending more, brokerage assets are up by double digits, and our corporate clients are increasingly turning to us to help finance business expansion and merger activity." The bulk of the year-over-year drop in profits stemmed from a $4.0 billion litigation expense, "substantially all" of which was related to legacy mortgage-relat- ed matters, the bank said. Part of that charge included a $650 million settlement with AIG, which sued Bank of America in 2011 for $10 billion in damages, alleging misrepre- sentation in the sale of residen- tial mortgage-backed securities (RMBS) that tanked the com- pany after the packaged loans went bad. With that matter handled, the bank says it "has now resolved approximately 95 percent of the unpaid principal balance of all RMBS as to which RMBS securities litigation has been filed or threatened for all Bank of America-related entities." Still remaining, however, is a major settlement with the Justice Department that insiders say has stalled in recent weeks as representatives from both sides struggle to find middle ground. While details on a final deal still have not emerged, the Wall Street Journal reports that the megabank has boosted its settlement offer to $13 billion, which would be level with what JPMorgan Chase paid last year in its own agreement. In its Consumer Real Estate Services segment, Bank of America reported a net loss of $2.8 billion in Q2 compared to a loss of $930 million last year. Revenues in that segment de- clined $725 million to $1.4 billion, driven mostly by lower origina- tions and lower servicing income. The bank reported that first- mortgage originations were down 59 percent compared with a year ago, largely reflecting a decline in demand for refinances. While production was down, Bank of America did benefit from ongoing improvements in credit quality. The provision for credit losses was $411 million in the second quarter, a decline from $1.2 billion in Q2 2013, "driven by lower levels of de- linquencies across the consumer lending portfolio, as well as im- provement in the consumer real estate portfolios, primarily due to increased home prices." new Jersey lender settles mortgage discrimination suit disAble persons Affected Are receiving dAmAges for extrA pAperwork. NEW JERSEY // A New Jersey- based mortgage company has come to a $104,000 settlement with HUD regarding allega- tions of discrimination against disabled borrowers. Freedom Mortgage Corporation was accused of requiring unnecessary extra pa- perwork from disabled persons, including medical documents and proof of disability pay. According to the Fair Housing Act passed in 1968, it is illegal for lenders to discriminate based on a variety of descrip- tors, including race, religion, and disabled status, among others. HUD's assistant secre- tary for fair housing and equal opportunity, Gustavo Velasquez, expressed satisfac- tion that Freedom Mortgage Corporation is taking the steps needed to "comply with its obli- gation to treat persons with dis- abilities the same way they treat those who are not disabled." Freedom Mortgage main- tained in an email that it has done nothing wrong, but has nonetheless created a system of grievance resolution as part of the settlement with HUD to aid 69 applicants who allege dis- crimination. The applicants will receive payments under a tiered system, getting either $1,000, $2,000, or $5,000 as determined. Freedom Mortgage has also agreed to scrub from its policies extra requirements related to verifying disability payments. ORIGINATION LocaL Edition The bulk of the year- over-year drop in profits for BofA stemmed from a $4.0 billion litigation expense, "substantially all" of which was related to legacy mortgage-related matters, the bank said.