Slideshow Legal Bills Pile Up at Banks

Published
  • September 03 2014, 11:00am EDT
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Each quarter banks report their worst-case estimates of costs tied to lawsuits and regulatory probes. Some banks reported lower figures in recent quarters, but others are braced to spend more to resolve legacy issues. New legal threats loom, too.

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Milestone Penalty

Bank of America was forced to pay a record amount-$16.6 billion-to resolve mortgage-fraud claims against it. That's larger than the amounts paid by JPMorgan Chase or Citigroup. Some have complained that it's unfair B of A could write off some of the settlement on its taxes.

(Image: Bloomberg News)

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More Civil Actions in the Works?

The Justice Department is expected to exercise its authority under the Financial Institutions Reform, Recovery and Enforcement Act to threaten civil lawsuits against more banks for alleged mortgage abuses. The FIRREA law allows prosecutors to bring claims with a lower standard of proof than criminal cases and was used to extract settlements from B of A, Citi and JPMorgan.

When Does It Stop?

Fifth Third Bancorp in Cincinnati lowered the worst-case estimate of its legal exposure in the second quarter, but CFO Tayfun Tuzun declined to say when the company's myriad legal issues would come to an end.


Steeling the Stagecoach

Wells Fargo raised the ceiling on its potential legal costs in the second quarter to $1.2 billion, from $911 million in the previous quarter. No specific reason was given, but Wells has several ongoing legal matters, including one tied to Federal Housing Administration insurance.

(Image: Bloomberg News)

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Not Out of the Woods

JPMorgan Chase's legal bill for subprime mortgage-backed securities was $13 billion, less than the $16.6 billion invoice that Uncle Sam submitted to B of A. But JPMorgan has plenty of other legal worries, including the ongoing monitoring of its consumer relief obligations.

(Image: Bloomberg News)


Servicer Probe

Ocwen Financial, one of the nation's largest nonbank mortgage servicers, has been served with two federal subpoenas and a request for information from New York state in the past two months. Investigators are looking into potential conflicts at Ocwen's spin-off companies.

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Fishing Overseas

U.S. banks aren't the only ones feeling heat from America's banking regulators. European banks, including Barclays, Deutsche Bank and UBS, have received subpoenas from regulators looking into their "dark pool" trading operations.

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Checking Under the Hood

Subprime auto lending may be the new front for legal exposure. Santander Consumer USA and General Motors' finance arm have reported receiving subpoenas from federal prosecutors.

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Open House for Lawsuits?

Major Federal Housing Administration lenders have been scrutinized by the Justice Department and others for alleged faulty underwriting of FHA loans. JPMorgan has already paid $614 million to settle a probe, and more banks may be targeted.

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