By Agency Reporter

Faulty mortgages and foreclosure abuses have cost the nation’s five biggest home lenders at least $65.7bn, according to a tally by Bloomberg News, and new claims may push the industry-wide total to twice that amount.

Bank of America Corporated had the biggest costs, totaling $39.1bn since the start of 2007, according to data compiled by Bloomberg. JPMorgan Chase & Company ranked second by assets, followed with $16.3bn and Wells Fargo & Company the biggest US home lender, had $5.09bn, the data show.

The costs have eclipsed predictions from bankers and analysts that lenders would suffer only modest damage from what Bank of America Chief Executive Officer Brian T. Moynihan has called “the mortgage mess.”

“Paul Miller, the FBR Capital Markets & Company analyst, said costs for all banks could surpass $121bn as the bill comes due for lax lending practices.

“You’re not talking about improperly stapling together two documents, you’re talking about systematic fraud in the system,” Neil Barofsky, the former special inspector general for the US Treasury’s Troubled Asset Relief Program, said in an interview. “What this shows is that before the financial crisis, the banks were essentially lying to the purchasers of the mortgages about the quality.”

Bloomberg’s tally was compiled from regulatory filings, company statements and financial presentations by the nation’s five biggest mortgage lenders. The data cover provisions and expenses attributable to repurchases, foreclosure errors and abuses, payments to reimburse investors for lost value on faulty mortgages, legal settlements and litigation expenses.

The compilation also includes writedowns of assets, such as mortgage servicing rights, when the company attributed the loss in value to problems in mortgage underwriting or foreclosures and the costs of remedies. The figures may increase as more detailed breakdowns become available.

Miller, a former bank examiner, previously said costs might range from $54bn to $106bn for the banking industry. Under his new $121 bn estimate, which covers only repurchase costs, Bank of America, Wells Fargo, JPMorgan and Ally Financial Incorporated will bear 60 per cent of the burden, with Bank of America alone paying 33 per cent.

Source: Punch