Adding Up What Banks Could Owe in MBS Litigation


Since the details of JPMorgan's settlement were revealed in December, Wall Street firms have been poring over publicly available data to estimate their clients' potential exposure from soured residential mortgage–backed securities. The total price tag for the remaining 15 largest bank issuers: $48 billion, when each bank's total RMBS issuances during the relevant time period are compared to JPMorgan's yields. To arrive at those estimates, we collected RMBS issuance and exposure data and analyzed each component of the JPMorgan settlement, deriving percentages based on JPMorgan's settlement amount divided by publicly reported RMBS exposure. The $4 billion homeowner relief portion of the bank's total $13 billion outlay, viewed as a percentage of the $9 billion monetary payout (44 percent), is also extrapolated for the rest of the banks. Seven of the 15 banks have already resolved some litigation claims, which lowers their overall exposure. Estimated liability under this analysis doesn't take into account each bank's specific conduct and/or RMBS default rate, which vary.—Julie Triedman

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