Major US banks are under fire as foreclosure-related class-action lawsuits against them continue to mount, threatening the fragile industry with billions in potential losses.
Executives from a number of the nation's larger financial institutions are in Washington, DC this week defending the banks from multiple foreclosure fraud investigations, including a joint probe being conducted by all the attorneys general from all 50 states. Talks are under way to reach some kind of settlement in that matter, but the growing number of calss-action suits, insiders say, may pose an even bigger threat.
A congressional watchdog reported earlier in the week that the crisis could lead to billions in losses for the nation's banks, further prolonging the damage from the housing collapse and hindering government efforts to keep Americans in their homes.
The class action suits, which could eventually be expanded to the national level, seek damages for homeowners whose properties were illegally seized by lenders using fraudulent or improperly notarized documents. Bank of America, Wells Fargo, and JPMorgan Chase have been named in suits in Maryland, New Jersey, and Massachusetts; while suits have been filed against Ally Financial's GMAC unit in Florida and Maine.
The banks have crisis management specialists working around the clock to try to control the financial and public relations disaster. Bank of America, the nation's largest lender, has seen its shares fall 21 percent so far this year, making the worst-performing stock of the 30 components of the Dow Jones industrial average.
