Foreclosure Crisis: Price Tag Update

After a week of alarming predictions about the impact of troubled foreclosure proceedings on the big banks, several analyst reports have begun to put dollar figures on the cost of an emerging dustup over “robo-signers” and poorly executed evictions.

Analysts at JPMorgan Chase, which is one of the banks to have suspended foreclosures in light of mucked-up documentation — say that banks could lose between $55 billion and $120 billion over the next five years on buybacks of mortgages whose value has declined as a result of poor underlying paperwork. Bloomberg reports:

While a “firestorm of news” sparked by some loan servicers’ decisions to halt action on defaulted loans is drawing renewed attention to banks’ mortgage-repurchase risks, the foreclosure issues themselves are mostly “process-oriented problems that can be fixed,” the analysts wrote.

“Putback risk may be the biggest issue facing banks,” the analysts wrote, referring to items such as faulty appraisals that can be used to force lenders to repurchase mortgages under sales contracts. The analysts declined to comment beyond the report.

Meanwhile, Dick Bove, a bank analyst for Rochedale Securities, estimates the putback problem could ding banks for as much as $150 billion.

Citigroup, which says that its foreclosure paperwork processes are in order, nevertheless raised its reserves against mortgage repurchases to $952 million in the third quarter.

In terms of legal costs related to the team of 50 attorneys general who have vowed to unite against legally dubious foreclosures, Fortune’s Colin Barr points to a Janney Capital Markets analysis that says the big banks could face a bum-foreclosure price tag of around $3.7 billion — as much as $1 billion each for two banking giants JPMorgan Chase and Bank of America.

mtaylor [at] | @mbrookstaylor

Foreclosure Crisis: Price Tag Update