NEW YORK – The biggest U.S. lenders including Bank of America Corp. and JPMorgan Chase & Co. will probably avoid rating downgrades from costs to repurchase faulty mortgages, Standard & Poor’s said.
The six biggest residential lenders have already booked most of the costs from buying back loans from U.S.-controlled Fannie Mae and Freddie Mac, and other demands will be resolved over a “protracted timeline,” S&P credit analysts led by Stuart Plesser said Tuesday in a research note.
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“Based on banks’ 2010 pretax earnings and our projection that 2011 earnings will be even higher, representations and warranty expenses should easily be covered,” Plesser wrote.
Bank of America, the largest U.S. lender by assets, posted a $1.24 billion fourth-quarter loss after writing down the value of mortgage operations and setting aside more for loan buybacks. The Charlotte, N.C.-based firm’s 2008 acquisition of Countrywide Financial Corp., then the biggest U.S. mortgage lender, saddled the company with lawsuits and demands to repurchase bad loans.
Public pension funds blame rating companies Moody’s Investors Corp. and S&P for helping cause the global financial crisis by giving top rankings to mortgage-linked securities that blew up when the U.S. housing market collapsed in 2007.
