Bank of America Corp. cleaned up its
At JPMorgan Chase & Co., direct buyback expenses tumbled after a big provision in the third quarter, and the company said another $1.5 billion addition to its litigation reserves brought it in line with a range of analyst estimates of its exposure to private investors.
Overall, fourth-quarter readings (see charts) on the fallout from shoddy underwriting of mortgages sold during the housing bubble showed concentrated damage at B of A as lenders appear to be moving past their liability to the government-sponsored entities and continuing their standoff against other claimants.
B of A's buyback provision jumped more than three and a half times from the third quarter, to about $4.1 billion, as it realized losses of about $3 billion — mostly reflecting
Reserves at the nation's four largest servicers and the losses they have realized during the last year and a half now total more than $20 billion — close to some analysts' projections for the lifetime, industrywide GSE tab.
Though new claims from the GSEs fell for a second consecutive period in B of A's fourth quarter, new claims from other parties more than tripled from the third quarter, to about $2.5 billion.
In its earnings report, B of A gave $7 billion to $10 billion as an upper range for losses on claims by other parties not yet reflected in its reserves. Pointing to the legal obstacles to such putbacks, however, Chief Financial Officer Charles Noski called the guidance "a possible range, not a probable range." He said he expects the matter "could take years to conclude."
B of A, which is the biggest of the Big Four servicers and has the highest delinquency rate in that group, also reported $1.5 billion of litigation expenses in the quarter, which Noski said was "primarily related to our consumer businesses, including the mortgage business." In the first nine months of 2010, B of A recognized $1.2 billion of litigation expenses.
Meanwhile, JPMorgan Chase recognized about $6.7 billion of litigation expenses in 2010. On its fourth quarter earnings call, Chief Financial Officer Douglas Braunstein said the company's effort to build its legal reserve should make those who agree with analysts' projections of its private-label liabilities "feel pretty comfortable with where we are going forward into 2011."
Chief Executive Jamie Dimon said, "The important thing is, it is not going to be life-threatening to JPMorgan, and it will be years before we know the ultimate outcome."
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