Mortgage Mess May Costs Big Banks Billions

This mortgage has so many unknowns.

I don’t see how it can be cleared up in a short period of time,” said Richard X. Bove, an analyst with Rochdale Securities. “The moratorium won’t last that long but the problem will last at least four or five years, maybe a decade.” In the short-term, he said, “it could easily cost $1.5 billion per quarter.”

Meanwhile, the foreclosure machinery in many states has ground to a halt. Major institutions like Bank of America, JPMorgan and GMAC Mortgage have halted foreclosures in many states, and have not said when they would resume. As a result, foreclosed homes will remain on the bank’s books while racking up thousands of dollars a month in extra costs.

Now look at this paragraph

An alarming report on Bank of America, compiled by Branch Hill Capital, a San Francisco hedge fund, circulated widely on Wall Street Thursday. Branch Hill suggested that the bank, the nation’s largest, could be facing more than $70 billion in losses from mortgage securities that it may have to repurchase from Fannie Mae and Freddie Mac, as well as private investors.

Then there are delays that will costs on foreclosure delays.

Even if the larger losses envisioned by Mr. Mehta do not materialize, the foreclosure issue remains a worry. In a report, Paul Miller, an analyst with FBR Capital Markets, forecast that the controversy would cost the banking industry $6 billion to $10 billion. He estimated that each month’s delay cost the banks $1,000 per home loan, so if there was a three-month delay on the roughly two million homes currently in foreclosure, that translated into a $6 billion hit.

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