Home loans, packaged into securities, turned into a poor package for several investors. A few lines in contracts mean something significant, though. The poor mortgages could actually be the responsibility of the banks. A single clause might imply that banks are required to re-purchase securities gone badly. The total legal responsibility might add as much as over $60 billion. Thousands have lost their properties while others struggled through pay day loan after pay day loan just to remain on top of their home loans. Source for this article - Bad mortgage nightmare could cost banks $60 billion by MoneyBlogNewz. Mortgage security conditions Billions were made by banks that packaged, sold and re-packaged mortgage investments. The home loan investments weren't necessarily good. They were bad credit loans. When the loans went south, the financial institution would re-purchase the loan. This was a term in the securities. During the height of the home loan bubble, this seemed like a minor issue. Banks are not happy about the buybacks being compelled with all the homes in foreclosure. $60 billion liability The home loan backed investments buyback was triggered by values dropping. Credit ratings dropping did not help either. Credit ratings agencies estimate that the nation's six largest banking institutions face about $60 billion worth of buyback liability. Half of that legal responsibility is owed to U.S. Government-backed Freddie Mac and Fannie Mae. In January, B of A paid Fannie and Freddie $2.5 billion to buy back a portion of those mortgages. The home loans are all over the country right now. States like Nevada have an even higher foreclosure rate though. Buybacks for years Bank of America and JPMorgan Chase have to do lots of buybacks. They have the “highest exposure” to it. There are three groups of companies seeking to sue banks that are not buying back mortgages -- insurers, mortgage finance companies and private investors. Some of the loans may be repurchased by the banking institutions. They surely won't all be bought back though. Years of lawsuits and bad loans can be things the banking institutions have to deal with for a while. At the same time, investors could have poor loans that shouldn't be theirs anymore according to their contracts. Information from New York Times dealbook.nytimes.com/2011/02/09/banks-could-face-60-billion-tab-on-bad-loans/
