Magazine article American Banker

Montana Insurer Linked to BofA Charge

Magazine article American Banker

Montana Insurer Linked to BofA Charge

Article excerpt

NEW YORK -- A Montana-based insurance company's decision to stop making payments on mortgage loan guarantees in late January helped trigger the BankAmerica Corp.'s restatement of its fourth-quarter 1984 earnings.

John Hayden, president of the Glacier General Assurance Co., Missoula, said Thursday that his firm had been making payments of $1 million a month for several months prior to its decision to stop.

Glacier had issued financial guarantees on about $90 million worth of mortgage loans for which BankAmerica had acted as escrow agent and trustee.

"We just wanted to get this over with instead of bleeding to death," said Mr. Hayden, explaining his company's decision. He declined further comment.

Mr. Hayden's comments mark the first public confirmation that Glacier's discontinuation of payments helped force BankAmerica to alter its earnings statement, and that Glacier had been making some payments on the mortgage pools.

His assertions were corroborated by sources close to the thrifts that bought many of the loans.

BankAmerica had attributed its restated fourth-quarter earnings in part to "the discontinuance of payments by an insurer under financial guarantee bonds covering certain loans in the pool." The bank would not specify the insurer then or in subsequent inquiries.

In addition to the insurance payment problems, BankAmerica had attributed the earnings change to new appraisals on property values and problems with titles to properties.

On Jan. 21, BankAmerica announced a fourth-quarter net income of $73 million, despite a $37 million increase in its loan-loss provision caused by the mortgage pools. …

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