Friday, October 15, 2010

U.S. Bank Stocks Slide on Concern Over Foreclosure Inquiry - Bloomberg

U.S. Bank Stocks Slide on Concern Over Foreclosure Inquiry - Bloomberg: "rmonk, New York-based MBIA has sued mortgage sellers including Countrywide Financial, now part of Bank of America, and Credit Suisse Group AG over loans that failed to meet their promised quality. The loans were packaged into bonds through a process known as securitization and the bonds were insured by MBIA.

‘Another Defect’

Most losses that MBIA has paid or expects to pay on mortgage-related securitizations are linked to fraud or breaches of warranties or other representations, which originators are “contractually bound to remedy,” Kevin Brown, a spokesman for the insurer, said in an e-mailed statement today.

“Ineffective loan-transfer documentation would be another defect falling into this category,” he said. “We expect these repurchase obligations to be honored and therefore we anticipate substantial recoveries on these transactions.”

The declines come a day after JPMorgan, the second-biggest U.S. bank by assets, said it was adding $1 billion to reserves set aside for repurchasing mortgages and also expanded a review of foreclosures to about 115,000 files in 41 states, from at least 56,000 loans in 23 states on Sept. 23. JPMorgan CEO Jamie Dimon said the review will cost more money, though expenses will probably be “incremental.”"

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