Rising pressure on banks and mortgage firms are forcing lenders to merge, go out of business and make massive cuts to trim their bottom lines. The U.S. foreclosure crisis is making an ugly display of many banks balance sheets, and at least one major bank CEO is admitting to errors made during the robo-signing scandal.
Freddie Mac and Fannie Mae have more than 1.4 million homes in their REO inventories or shadow inventories to sell. The lenders have already started a program to sell-off large bulk inventories of homes to investors. The giant government lenders have been bailed out by tax payers at excess of $184 billion.
The pressure is on banks to tow the line and they are carefully watching in time for another round of government backed audits. The nation’s biggest mortgage lenders, including Bank of America with its former Countrywide unit, GMAC Mortgage, JP Morgan Chase and CitiGroup have some of the largest back logs of foreclosed homes to sell, and the inventories are expected to swell as they increase foreclosures in coming months.
When things really seem bad in the U.S. you might think about Spain, where lenders have turned back to 100% mortgage financing to get rid of their foreclosure inventory. That’s about the only way the ailing Spain economy can handle things these days – the same way the U.S. got into its real estate mess.
Few major U.S. bank executives talk publicly about the mess. But the CEO of one major bank isn’t like the other conning bankers too afraid to speak his mind publicly in the wake of the financial crisis.
In a straight forward worded letter to shareholders, JP Morgan Chase CEO Jamie Dimon said his bank contributed to the collapse of the U.S. housing market and that his major Wall Street firm is making progress on rectifying errors of the past.
Dimon is the first major Wall Street executive to publicly admit his firm was at fault in the robo-signing scandal, which caused millions of homeowners to lose their homes. “Our servicing operations left a lot to be desired,” wrote Dimon. “There were too many paperwork errors, including affidavits that were improperly signed because the signers did not have personal knowledge about what was in the affidavits, but instead relied on the company’s processes.”
JP Morgan is one of the nation’s five biggest lenders that took part in the government’s $25 billion deal with 49 states to settle the robo-signing scandal. An estimated 4.5 million foreclosure files are being audited by government investigators to determine the volume of foreclosure victims caught in the crisis.