Nov. 2015-Opportunity Knocks

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Th e M Rep o RT | 43 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 Department ORIGINATION local eDition ORIGINATION consistent financial performance in an uneven economic environ- ment while continuing to meet our customers' financial needs." "Compared with a year ago, we grew loans, deposits and capital, and returned more capital to shareholders through dividends and share buybacks. Our balance sheet and credit results remained strong and our 265,000 team members continue to focus on helping our customers succeed financially." Mortgage banking noninter- est income fell $116 million from second quarter to $1.6 billion, Wells Fargo reported. In addi- tion, residential mortgage origina- tions were $55 billion in the third quarter, down $7 billion from last quarter. The production margin on residential held-for-sale mortgage originations was 1.88 percent, compared with 1.75 percent in the previous quarter. Net mortgage servicing rights (MSRs) results were $253 million, compared with $107 million in second quarter 2015. Bank of America's year-to-date net income totals $13.2 billion or $1.09 per share. Revenue declined $521 million to $20.9 billion from last year, mostly driven by higher negative market-related adjust- ments on their debt securities portfolio due to lower long-term interest rates. Net interest income for the bank also fell $702 million to $9.7 billion year-over-year due to lower consumer loan balances and lower yields. Meanwhile, noninterest income rose $181 mil- lion to $11.2 billion from last year, reflecting increases in mortgage banking and card income, higher asset management fees, and other income. The company originated $13.7 billion in first-lien residential mortgage loans and $3.1 billion in home equity loans in the third quarter of 2015, compared to $11.7 billion and $3.2 billion, respective- ly, in the year-ago quarter. Bank of America CEO Brian Moynihan explained that the "solid results" in the third quarter reflected the execution of the bank's "long-term strategy." "The key drivers of our busi- ness–deposit taking and lending to both our consumer and corpo- rate clients–moved in the right direction this quarter and our trading results on behalf of clients remained fairly stable in challeng- ing capital markets conditions. Our balanced approach to serving customers and clients is on track as the economy continues to move forward." "Our results this quarter reflect our ongoing efforts to improve operating leverage while continu- ing to invest in our business," said Paul Donofrio, CFO at Bank of America. "We built capital and liquidity to record levels and grew total loans for the second consecutive quarter while con- tinuing to operate within our risk framework." Fifth third Bancorp agrees to $85 million settlement to resolve Origination Fraud claims The bank approved abouT 1,400 loans conTaining "maTerial defecTs" for fha insurance, and hundreds of The loans laTer defaulTed. OHIO // Fifth Third Bancorp, headquartered in Cincinnati, agreed to pay nearly $85 mil- lion to resolve civil fraud claims regarding approximately 1,400 loans originated by the bank that were insured by the FHA, ac- cording to an announcement from U.S. Attorney for the Southern District of New York Preet Bharara and Special Inspector General for the Troubled Asset Relief Program Christy Goldsmith Romero. According to the announce- ment, Fifth Third made a volun- tary disclosure of approximately 1,400 loans from 2003 to 2013 that the bank certified as eligible for FHA insurance that were later found to contain material defects that would have made those loans ineligible for FHA insurance. The defects in the loans were never self-reported to HUD, which later resulted in millions of dollars in losses to the department. Fifth Third, which received a $3.4 billion bailout from TARP in 2008, admitted it violated HUD requirements by failing to report to HUD loans the bank knew were defective. Fifth Third agreed to pay $85 million to cover HUD's losses on approximately 500 of the loans that defaulted on which HUD paid insurance claims and to indemnify HUD on any losses the department may incur for the remaining approximately 900 loans that have not defaulted, ac- cording to the announcement. Also as part of the settlement, Fifth Third employees responsible for the bank's failure to self-report the defective loans have been terminated and the bank has reformed its business practices. "Before and during the time Fifth Third was bailed out in TARP, its Quality Control employees made false representa- tions to HUD that residential mortgages the bank originated were of the quality required to be insured by HUD," Romero said. "The bank's false representations cost HUD millions of dollars to pay insurance claims on 519 of the materially defective loans that later defaulted. Fifth Third's actions to fire those employees, voluntarily disclose its violations of the False Claims Act and FIRREA to law enforcement, and make corporate changes should stand as an example for others who violated the law." Fifth Third said it was "pleased to have concluded this agreement with the government, covering loans dating to the financial crisis. We are excited about the future of our mortgage business." The issue of the defective loans arose in part from a whistle- blower complaint filed by the False Claims Act, although Fifth Third made a voluntary disclo- sure to the government regarding the defective loans in 2012 without knowledge of the whistleblower complaint, according to the an- nouncement. "our results this quarter reflect our ongoing efforts to improve operating leverage while continuing to invest in our business. We built capital and liquidity to record levels and grew total loans for the second consecutive quarter while continuing to operate within our risk framework." —Paul Donofrio, cfo, bank of america

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