Yesterday, the Department of Justice and a group of state Attorneys General were scheduled to finally announce the terms of a settlement with the nation’s biggest banks over the banks’ foreclosure fraud abuses. However, the announcement was canceled at the last minute, leaving the status of the settlement where it has been for several months: in limbo.
Part of the hesitation on the part of several of the AGs is that a settlement would limit investigations into the extent of the fraud perpetrated by the banks. In the meantime, between shoddy foreclosure and faulty loans, the biggest U.S. banks have already lost $72 billion — with the most losses coming at Bank of America — and are preparing to lose even more:
Costs from faulty mortgages and shoddy foreclosures have topped $72 billion at the biggest U.S. banks as they near a settlement of a 50-state probe into the industry’s practices.
Wells Fargo & Co., Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Ally Financial Inc., the five largest home lenders during the real estate boom, tallied at least $6.78 billion in new costs tied to mortgages during the second half of 2011, according to data compiled by Bloomberg. Bank of America, ranked second among U.S. banks by assets, contributes $41.8 billion of the overall total.
“It’s a colossal failure of basic banking,” said credit analyst David Knutson. “It’s surprised everyone in terms of persistence and longevity and I think it will continue to surprise.”
Foreclosure fraud has been going on at the biggest banks since at least 1998. According to a New York Times report over the weekend, government backed mortgage giant Fannie Mae also knew about the shoddy foreclosure practices as far back as 2003, but did nothing. The more facts that come out regarding the extent of foreclosure fraud, the more it seems that further investigations and potential court action is warranted.