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Coronavirus Makes Its Mark On Bank Of America As Loss Provisions, Revolver Draws Surge
Bank of America followed JPMorgan in reporting a huge provision for credit losses as the country's most important financial institutions rush to quantify the likely domino effect of a near-total economic shutdown to arrest the spread of the coronavirus.
The reserve build for Q1 was $3.6 billion at Bank of America. The total credit loss provision rose to $4.8 billion.
"Despite increasing our loan loss reserves, we earned $4 billion this quarter, maintained a significant buffer against our most
LOL.
The April 1 mortgage payments were made (for the most part), even though many tenants did not pay their April 1 rent. So easy for borrowers to draw down on their LOC to make April 1 mortgage payment to bank. This had to be done under any circumstance – to secure negotiating position with bank for any necessary workouts/give back the keys. In most cases, those LOC’s are collateralized- so no matter how this turns out – the borrowers will be forced (by the lender) to give up that pledged collateral.
Like I said before, lets see what happens May 1. Most borrowers have started their documentation trail regarding “I can not keep on paying you” and the banks “automated” response is- “we are currently overwhelmed and will respond to you in the order received”. Most commercial bankers (who interface with borrowers) can not even sneeze without getting approval from 2-3 levels up the bureaucracy chain. This is a slow moving train wreck. IMO, there is no way the reserves established for Q1 ( before the May 1 payment date) are adequate.
Shut up & Print 500 $ Trillion More
FWIW, I, like many others, am in a cash crunch, so I applied for mortgage forbearance from my lender, Wells Fargo, last Thursday. There was a button on my mortgage statement page “Need assistance due to COVID19?” Pressed the button, took approximately 60 seconds to apply for and receive a 3-month forbearance. They are still undecided about how I have to pay them back – lump sum, structured payments, loan extension or refinance. YMMV.