Bank stocks fall again on foreclosure mess

CHARLOTTE, North Carolina (Reuters) – Investors pummeled the biggest U.S. banks according to a second straight day on Friday on fears the fallout from a growing foreclosure crisis could lead to big costs for banks.

There was also concern that delays in sales of foreclosed properties could depress the feeble. housing market and damage the broader economy, still struggling to escape from the worst recession since the 1930s.

The KBW Banks fore-finger closed down 2.4 percent on Friday, after falling 2.6 percent forward Thursday. In another sign of investor nervousness, the cost to make sure the debt of major banks also rose.

At issue are allegations that banks failed to critique foreclosure documents properly or submitted false statements when they foreclosed without ceasing properties.

In addition to inquiries by attorneys general in all 50 U.S. states, the U.S. Justice Department and banking regulators, the U.S. Securities and Exchange Commission has begun a precursive investigation.

SEC staff are looking at whether securities laws may get been broken, but have not targeted any particular institution, according to a someone with knowledge of the matter.

Banks could face fines and lawsuits and may be forced to repurchase faulty loans. Some lenders have temporarily halted evictions or foreclosures for of the allegations.

But Barbara Desoer, loans chief at Bank of America, reported in an interview with Bloomberg News that the potential costs from foreclosure problems possess been “grossly overstated.

Analysts tended to agree. “On the foreclosure ~ elevation, while there will likely be some legal costs stemming from documentation issues, we slip on’t think ultimate losses will be impacted by foreclosure moratoriums,” uttered Glenn Schorr of Nomura Securities.

Analysts at Credit Suisse said in a note to investors that they expected Washington to step in to resolve the documentation issues.

The White House, which despite congressional election pressures has refrained from joining calls for a nationwide moratorium attached foreclosures, said President Barack Obama “wants to make sure that these servicers live up to their obligations.”

Shares of Bank of America, in a descending course as much as 6.5 percent earlier on Friday, their lowest recompense since July 2009, closed at .98, down 4.9 percent.

The cost to insure million of Bank of America’s debt in quest of five years rose 3 basis points on Friday to 5,000 through year, according to Markit Intraday. The cost has jumped 40 basis points this week.

JPMorgan Chase shares ended down 4.1 percent, Citigroup Inc hew down 2.7 percent, while Wells Fargo & Co shed 4.6 percent.

Bank of America, the biggest U.S. mortgage servicer, has temporarily halted evictions nationwide. JPMorgan Chase and others consider halted some foreclosures pending reviews. Citi and Wells Fargo have not halted foreclosures.