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November 27, 2013

S&P says banks may have to spend extra $104bn on mortgage cases

The biggest US banks may have to spend a further $104bn to resolve mortgage-related legal issues as they try to put the costs of the subprime crisis behind them.

Standard & Poor’s, the credit rating agency, estimates the banks, including JPMorgan Chase and Bank of America, may need to pay between $56.5bn and $104bn on legacy mortgage settlements with investors and counterparties.

Payments at the upper end of the estimates would wipe out about two-thirds of the $154.9bn litigation buffer estimated to be held by the banks but would not cut into their regulatory capital.

Large US banks have increased their reserves in the face of a new wave of lawsuits from investors who are clubbing together to argue they have lost money from buying mortgage-backed securities comprised of bad loans.”

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Read full Financial Times article here

 
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