Mortgage Drama: Banks are Hit Hard

It seems like there is always some type of drama in the mortgage industry nowadays. From the Federal Housing Finance Agency suing 17 banks to high foreclosure inventories and robo-signing, drama is still definitely surrounding the real estate market.

Originally, it was estimated that banks would suffer losses totaling somewhere between $54 billion and $106 billion—with all bank losses combined. However, with the numbers adding up it appears as though the number is closer to $121 billion—which is a significant difference.

Of the $121 billion, 60% of the losses fall on Wells Fargo, Bank of America, Citigroup, and JP Morgan Chase. In fact, analysts estimate that Bank of America’s losses are around $40 billion alone.

These numbers show that the incredibly lax lending conducted by banks across the country for many years is coming with a price tag that is more than originally expected. However, these numbers are estimations that could turn out to be significantly above $121 billion in the long run. In short, we have no idea the true price of the errors of these banks, but it will definitely be a lot more than our economy can currently handle.

Hopefully these banks learned the lesson that having lax lending standards may be beneficial temporarily, but in the end these faulty lending standards will come back to bite them—and the rest of the country—where it hurts.

In the end, there is still a lot of drama in the real estate market, especially revolving around banks. Only time will tell how much damage was actually done by the lax lending standards, but until then we have incredible analysts that are keeping us up to date on their estimations—which unfortunately is sitting higher than expected at $121 billion.