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Top 10 Mortgage Migraines for 2012

No. 1: Mortgage Litigation No. 1: Mortgage Litigation

No bank faces greater exposure to mortgage-related lawsuits than Bank of America. CEO Brian Moynihan's company has set aside more than $15 billion in litigation reserves to cover legal issues from its acquisitions of Countrywide Financial in 2008 and Merrill Lynch in 2009. (Image: Bloomberg News)

No. 2: Falling Home Prices  No. 2: Falling Home Prices

Home prices fell throughout 2011 and are expected to fall another 10% before stabilizing in the second half of 2012, according to Fitch Ratings.

No. 3: Buyback Requests   No. 3: Buyback Requests

Fannie Mae and Freddie Mac are forcing banks including SunTrust to buy back loans that did not meet underwriting standards. Total repurchase demands, including those from private investors, could cost banks between $54 billion to $106 billion, according to FBR Capital Markets.

No. 4: Second-Lien Exposure  No. 4: Second-Lien Exposure

Massive numbers of outstanding home-equity loans are based on houses with little or no equity left in them, leaving the nation's largest banks with hundreds of billions of dollars of second-lien exposure.

No. 5 : State Attorneys General Settlement No. 5 : State Attorneys General Settlement

Attorneys general want the top five banks to pay between $20 billion to $25 billion to settle charges of improper foreclosures and mortgage servicing abuses. But talks have broken down, and now Massachusetts Attorney General Martha Coakley is suing servicers while California and Nevada launch a joint investigation.

No. 6 : Consumer Protection Agency No. 6 : Consumer Protection Agency

Even as the Consumer Financial Protection Bureau struggles to get fully up and running, it is still starting to exert its influence on the industry. The agency in December began fielding inquiries from consumers on mortgages and other home loan products that could mean trouble for lenders. (Image: Bloomberg News)

No. 7 : FHA on the Brink No. 7 : FHA on the Brink

The Federal Housing Administration may need a taxpayer-funded bailout, particularly if housing prices fall dramatically next year. That puts the main insurer of home-purchase loans and the entire housing market in jeopardy. (Image: Bloomberg News)

No. 8: Foreclosure Reviews No. 8: Foreclosure Reviews

After mortgage servicers were caught forging foreclosure documents, regulators issued enforcement actions against the 14 largest banks, which will spend millions of dollars reviewing foreclosure cases for errors, misrepresentations and other deficiencies that hurt borrowers. (Image: Bloomberg News)

No. 9 : Rising Guarantee Fees No. 9 : Rising Guarantee Fees

Large banks like Bank of America and Wells Fargo face higher guarantee fees charged by Fannie Mae and Freddie Mac. Ed DeMarco, head of the GSEs' regulator, said the big banks' volume discounts will be eliminated. (Image: Bloomberg News)

No. 10: Shadow Inventory No. 10: Shadow Inventory

Four million homeowners are either 90 days late in paying their mortgage or are already going through the foreclosure process. The so-called shadow inventory of distressed homes is adding to pressure on housing prices, as banks and the government try to dispose of a glut of foreclosed properties.

The largest banks face massive mortgage problems in 2012, including litigation, falling home prices and regulatory changes that are expected to cost them billions of dollars.

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