Banks Warn of Possible Costs From Mortgage-Investor Lawsuits
Bank of America (BAC), Citigroup (C) and Wells Fargo & Co. (WFC) are among U.S. banks that said in Friday regulatory filings they may incur costs defending lawsuits from investors in their mortgage-backed securities.
Bank of America said it is a defendant in cases alleging that documents relating to more than $375 billion in mortgage-backed securities may have contained misrepresentations and omissions, and failed to meet underwriting standards. Wells Fargo and Citigroup said they were defendants in similar lawsuits, and that costs may rise from the resulting litigation.
Some mortgage-backed securities investors have threatened to sue several of the largest U.S. mortgage providers if they don't repurchase debt related to allegedly faulty mortgaged-back securities, in which many mortgages have gone into default.
Financial analysts have said JPMorgan Chase & Co. (JPM), Bank of America and other mortgage sellers may collectively take losses in the $100 billion range if investors force them to buy back debt on faulty mortgages.