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Bank Of America's Mortgage Tab: $42B And Counting


Mistakes happen but when you’re a big bank with troubled mortgages on your books the mistakes are costly–in the form of billions of dollars.

No bank knows that better than Bank of America which has agreed to pay a jaw-dropping $42 billion, settling credit and mortgage-related legal battles in just the last three years.

Overall, the nation’s six biggest banks by assets including BofA, JPMorgan Chase, Wells Fargo, Citigroup, Goldman Sachs, Morgan Stanley and MetLife have agreed to settle for at least $60 billion in credit crisis and mortgage-related settlements, according to data compiled by SNL Financial.

BofA’s $42 billion legal tab makes up 66% of the total amount the top six biggest banks have agreed to pay in 2010, 2011 and 2012. So, if you were wondering which bank bore the brunt of the mortgage and foreclosure fallout look no further than Bank of America. The biggest chunk of its settlements came in 2011 when it settled claims with Bank of New York Mellon Corp. as trustee for investors in private-label RMBS for $8.6 billion. That year it also agreed to pay $11.8 billion for its share in the National Mortgage Settlement.

The bank with the next biggest tab is Wells Fargo with $8.3 billion in settlements over the course of three years ending in 2012. 2011 was also Wells’ worst year for settlements due to the national mortgage settlement where it agreed to pay $5.3 billion. Wells has the market’s biggest share of mortgage business but was able to avoid much of the subprime problems its peers like BofA endured.

JPMorgan Chase is not far behind Wells with $7.8 billion in settlements. It paid $2.7 billion for its share of the national mortgage settlement in 2011 and the following year coughed up $2 billion to settle foreclosure abuse claims with regulators.

Citigroup’s $3.6 billion legal tab is the smallest among the big four retail banks with much of that going toward the national mortgage settlement where the bank agreed to pay $2.2 billion. In 2012, the bank also settled $590 million in Citigroup securities litigation in which investors claimed damages as a result of misrepresentations of Citigroup’s exposure to impaired CDOs.

The costs of settling these kinds of cases go beyond the actual settlement amounts. There are legal fees and expenses to consider too and now surprisingly Bank of America has been spending plenty. It’s annual legal fees have increased every year since 2009 from $1.14 billion to $1.43 billion in 2012. The most recent figure represents 2% of its total noninterest expense.

JPMorgan Chase is the only other bank whose legal fees exceeded $1 billion last year.

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