Foreclosure process debacle may result to fines for Wells Fargo, BofA

Foreclosure Process Probe Will Result to Hefty Fines

The foreclosure process mishandled by big mortgage companies Wells Fargo and Bank of America under investigation may result to hefty fines.

State attorneys general of all 50 states are conducting a probe amid allegations that the banks kicked people out of their homes based on shoddy paperwork.

Bank of America, based in Charlotte, North Carolina, said in a filing with the Securities and Exchange Commission that it expects to incur "significant legal costs" in dealing with the foreclosure process fiasco, in addition to paying an estimated $230 million worth of fees from slowed foreclosures. In October, Bank of America suspended its foreclosure process in all 50 states pending a review of more than 100,000 cases.

Wells Fargo on the other hand tried to downplay the costs it may shoulder, saying they will not have a "material adverse" effect on its bottom line. The San Francisco, California-based lender expects legal costs to reach as much as $1.2 billion.

Bank of America said it could spend nearly $1.5 billion while Citigroup said that it could pay up to $4 billion in litigation costs.

New York City-based Citigroup confirmed it is being investigated on how it handled debt obligations. The bank, the third-biggest in the country in terms of assets, said in its report to the SEC that it will cooperate in the probe about its "subprime and other mortgage-related conduct."

The SEC ordered the banks to divulge potential financial losses "when there is at least a reasonable possibility" for them to be incurred during the resolution of the mess about the foreclosure process.

Posted by James Fried on Sunday February 27 2011, 3:27 AM EST. Ref: Bloomberg. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0