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Lenders still on the hook for mortgage crisis

Almost a year ago, the nation's five largest banks entered into a $26 billion settlement agreement with 49 state attorneys general after being accused of improper foreclosure practices such as "robo-signing". But the lenders -- including Bank of America, JPMorgan Chase, Wells Fargo and Citigroup -- aren't off the hook yet.

Dozens of new lawsuits filed by prosecutors, investors, regulators and insurers could potentially result in the banks paying another $300 billion, which could also have a direct impact on the slowly-recovering real estate market in Florida and the rest of the nation. The lawsuits stem from an alleged $1 trillion worth of shoddy mortgage securities that collapsed like a house of cards during the economic recession.

The banks are being accused of fraud by state and federal prosecutors; they are facing claims from investors who want the banks to buy back the rotten loans; and they are facing major allegations and penalties from regulators and insurers.

One of the biggest lawsuits was filed by the Federal Housing Finance Agency against 17 banks that allegedly fooled mortgage finance giants Fannie Mae and Freddie Mac into buying shoddy securities in the years leading up to the economic collapse. The lawsuit seeks $200 billion in damages.

While most agree that the banks should face consequences for bad behavior, experts warn that another expensive blow to the banks could also cause a blow to the country's economic recovery. For example, analysts say the lending ability of the banks could be weakened, stopping the real estate market's growth in its tracks.

According to analysts, the bottom line is that even after last year's $26 billion settlement, the mortgage-related matters are still far from settled for the lending industry.

Source: The New York Times, "Mortgage Crisis Presents a New Reckoning to Banks," Jessica Silver-Greenberg, Dec. 9, 2012

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