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Bank of America faces fines or regulator actions from faulty foreclosure documents

Bank of America and Wells Fargo, the largest U.S. mortgage firms, said they may face fines or enforcement actions from regulators amid investigations into foreclosure procedures.

The probes may also lead to significant legal costs and investors will not let this issue go away. Blake Howells, an analyst at Becker Capital Management Inc. in Portland, Oregon, said, “There will be more lawsuits that come down the road.”

The largest U.S. banks have been trying to reassure investors that costs from faulty foreclosure documents are manageable. Wells Fargo said it didn’t expect litigation costs to have a “material adverse” impact on its financial position. Bank of America said it faced $230 million in fees from slowed foreclosures.

U.S regulators want $20 Billion Deal

U.S. regulators may try to extract $20 billion of penalties in a settlement with banks that serviced flawed loans. Terms of an accord, from regulators led by the Treasury Department and Department of Housing and Urban Development, haven’t been formally presented to banks.

Bank of America also said a bondholder group pressuring the lender to repurchase soured mortgages has almost doubled the number of securitizations it’s challenging.

The group is disputing 225 securitizations, up from 115 as of Oct. 18, according to Bank of America’s filing. Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are among the investors, people familiar with the matter said in October.

Costs of Litigation

Wells Fargo said the high end of estimated litigation losses could be $1.2 billion beyond the reserve already set aside. Bank of America’s losses may be as much as $1.5 billion. Citigroup Inc. said yesterday that as much as $4 billion in additional costs from pending legal matters are “possible, but not probable.”

Banks are releasing estimates after the SEC, in an October letter to corporate finance chiefs, said companies should disclose potential losses “when there is at least a reasonable possibility” that they may be incurred, even if the risk is too low to require reserves.

Citigroup, the third-largest U.S. bank by assets, also said U.S. regulators are examining how it structured and sold collateralized debt obligations as part of an investigation into mortgage-related businesses.

Isn’t a shame that these billions aren’t going to borrowers applying for a loan modification? No, instead, this money will line the pockets of Wall Street lawyers and who knows what the government does with fines they collect – pay down the debt, pay salaries?
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Source: http://www.bloomberg.com/news/2011-02-26/bank-of-america-wells-fargo-see-fines-actions-on-foreclosures.html

Technorati Tags: bank of america faulty foreclosures, wells fargo faulty foreclosures, bank of america flawed loans, wells fargo flawed loans

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