The Bank of America Corporation is an American multinational investment bank and financial services company based in Charlotte, North Carolina, with central hubs in New York City, London, Hong Kong, Minneapolis, and Toronto. Bank of America was formed through NationsBank's acquisition of BankAmerica in 1998. It is the second largest banking institution in the United States, after JPMorgan Chase. As a part of the Big Four, it services approximately 10.73% of all American bank deposits, in direct competition with Citigroup, Wells Fargo, and JPMorgan Chase. Its primary financial services revolve around commercial banking, wealth management, and investment banking.
Franklin Delano Raines also known as Frank Raines is an American business executive. He is the former chairman and chief executive officer of the Federal National Mortgage Association, commonly known as Fannie Mae, who served as White House budget director under President Bill Clinton. His role leading Fannie Mae has come under scrutiny. He has been called one of the "25 People to Blame for the Financial Crisis" according to Time magazine.
A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). Originally developed as instruments for the corporate debt markets, after 2002 CDOs became vehicles for refinancing mortgage-backed securities (MBS). Like other private label securities backed by assets, a CDO can be thought of as a promise to pay investors in a prescribed sequence, based on the cash flow the CDO collects from the pool of bonds or other assets it owns. Distinctively, CDO credit risk is typically assessed based on a probability of default (PD) derived from ratings on those bonds or assets. The CDO is "sliced" into "tranches", which "catch" the cash flow of interest and principal payments in sequence based on seniority. If some loans default and the cash collected by the CDO is insufficient to pay all of its investors, those in the lowest, most "junior" tranches suffer losses first. The last to lose payment from default are the safest, most senior tranches. Consequently, coupon payments vary by tranche with the safest/most senior tranches receiving the lowest rates and the lowest tranches receiving the highest rates to compensate for higher default risk. As an example, a CDO might issue the following tranches in order of safeness: Senior AAA ; Junior AAA; AA; A; BBB; Residual.
Bank of America Home Loans is the mortgage unit of Bank of America. In 2008, Bank of America purchased the failing Countrywide Financial for $4.1 billion. In 2006, Countrywide financed 20% of all mortgages in the United States, at a value of about 3.5% of United States GDP, a proportion greater than any other single mortgage lender.
The United States housing bubble was a real estate bubble affecting over half of the U.S. states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012. On December 30, 2008, the Case–Shiller home price index reported its largest price drop in its history. The credit crisis resulting from the bursting of the housing bubble is an important cause of the 2007–2009 recession in the United States.
Earnest Stanley O'Neal is an American business executive who was formerly chairman and chief executive of Merrill Lynch having served in numerous senior management positions at the company prior to this appointment. O'Neal was criticized for his performance during his tenure as chief executive at Merrill Lynch, where he oversaw the deterioration of the firm's stability and capital position, which resulted in his ouster in September 2007, and the firm's eventual fire sale to Bank of America one year later. Prior to his tenure as Chairman and CEO, Merrill Lynch had thrived as a stand-alone company since 1914.
American Freedom Mortgage, Inc. (AFM) was a private S Corporation incorporated on February 2, 2001, according to the Georgia Secretary of State, and headquartered in Marietta, Georgia. AFM conducted business as a multi-state direct-to-consumer correspondent lender and mortgage broker specializing in the origination of subprime and Alt-A mortgage loans. AFM also operated a wholesale mortgage lending division that originated loans via approved mortgage brokers and which used the fictitious name AFMI Funding. As a correspondent lender, AFM sold the mortgage loans on the open market to larger investors.
A stated income loan is a mortgage where the lender does not verify the borrower's income by looking at their pay stubs, W-2 forms, income tax returns, or other records. Instead, borrowers are simply asked to state their income, and taken at their word. These loans are sometimes called liar loans or liar's loans. Stated income loans were originated by Ameriquest.
United States housing prices experienced a major market correction after the housing bubble that peaked in early 2006. Prices of real estate then adjusted downwards in late 2006, causing a loss of market liquidity and subprime defaults
The subprime mortgage crisis impact timeline lists dates relevant to the creation of a United States housing bubble and the 2005 housing bubble burst and the subprime mortgage crisis which developed during 2007 and 2008. It includes United States enactment of government laws and regulations, as well as public and private actions which affected the housing industry and related banking and investment activity. It also notes details of important incidents in the United States, such as bankruptcies and takeovers, and information and statistics about relevant trends. For more information on reverberations of this crisis throughout the global financial system see Financial crisis of 2007–2008.
Credit rating agencies (CRAs)—firms which rate debt instruments/securities according to the debtor's ability to pay lenders back—played a significant role at various stages in the American subprime mortgage crisis of 2007–2008 that led to the great recession of 2008–2009. The new, complex securities of "structured finance" used to finance subprime mortgages could not have been sold without ratings by the "Big Three" rating agencies—Moody's Investors Service, Standard & Poor's, and Fitch Ratings. A large section of the debt securities market—many money markets and pension funds—were restricted in their bylaws to holding only the safest securities—i.e. securities the rating agencies designated "triple-A". The pools of debt the agencies gave their highest ratings to included over three trillion dollars of loans to homebuyers with bad credit and undocumented incomes through 2007. Hundreds of billions of dollars' worth of these triple-A securities were downgraded to "junk" status by 2010, and the writedowns and losses came to over half a trillion dollars. This led "to the collapse or disappearance" in 2008–09 of three major investment banks, and the federal governments buying of $700 billion of bad debt from distressed financial institutions.
The U.S. subprime mortgage crisis was a set of events and conditions that led to a financial crisis and subsequent recession that began in 2007. It was characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages. Several major financial institutions collapsed in September 2008, with significant disruption in the flow of credit to businesses and consumers and the onset of a severe global recession.
Kenneth D. "Ken" Lewis is the former CEO, president, and chairman of Bank of America, the second largest bank in the United States and twelfth largest by total asset in the world. While CEO of Bank of America, Lewis was noted for purchasing Countrywide Financial and Merrill Lynch resulting in large losses for the bank and necessitating financial assistance from the federal government. On September 30, 2009 Bank of America confirmed that Ken Lewis would be retiring by the end of the year. Lewis was replaced by Brian Moynihan as president and CEO and Walter Massey as chairman of the board.
First Franklin Financial Corp. was a San Jose, California-based home mortgage lender that specialized in subprime loans. It had been owned by two of the biggest casualties of the subprime mortgage crisis, National City Corp. in Cleveland and Merrill Lynch.
The financial crisis of 2007–2008, also known as the global financial crisis and the 2008 financial crisis, was a severe worldwide economic crisis considered by many economists to have been the most serious financial crisis since the Great Depression of the 1930s, to which it is often compared.
Merrill, legally Merrill Lynch, Pierce, Fenner & Smith Incorporated and previously branded as Merrill Lynch, is an American investing and wealth management division of Bank of America. Along with BofA Securities, the investment banking arm, both firms engage in prime brokerage and broker-dealer activities. The firm is headquartered in New York City, and occupies the entire 34 stories of 250 Vesey Street, part of the Brookfield Place complex in Manhattan. Merrill employs over 14,000 financial advisors and manages $2.3 trillion in client assets. The company also operates Merrill Edge, an electronic trading platform.
Jeffrey Peek is a finance industry executive. He headed CIT Group from 2003 until it was reorganized following the 2008 financial crisis.
