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KIRO Radio's Tom Kelly digs deep into the Puget Sound real estate market

Real Estate

Hard hits: Lenders who paid the most for mortgage sins

Many of the huge lending institutions have reported fourth-quarter results by now and all are setting aside money to pay for legal expenses accrued from bad mortgage bets during the subprime debacle, Housing Wire reported.

Some lenders were hit harder than others, but which are suffering the most?

Bank of America posted a record net income of $3.4 billion for the fourth quarter of 2013, and it was the dubious winner of paying the highest mortgage-related litigation expenses of any of the major banks that HousingWire follows.

BA saw higher litigation expense reflecting the continued evaluation of legacy exposures largely related to residential mortgage-backed securities litigation. Litigation expenses rose to $2.3 billion in the fourth quarter of 2013 from $1.1 billion in the third quarter of 2013 and $916 million in the fourth quarter of 2012, showing an increasing urgency to put these cases behind them.

Morgan Stanley took the next biggest hit in the mortgage-related litigation cost sweepstakes. Its fourth-quarter results include $1.2 billion of "additions to legal reserves for mortgage-related matters, specifically litigation and investigations related to residential mortgage-backed securities and the credit crisis."

In third place, JP Morgan set aside $1.1 billion in legal expenses, plenty of which concerned its involvement with the Bernard Madoff Ponzi scheme settlement.

Goldman Sachs is in fourth place, where most of the $561 million the firm set aside for litigation involved mortgage operations. Goldman said that provisions for litigation and regulatory proceedings for the fourth quarter of 2013 were $561 million, up 155 percent from $260 million for the fourth quarter of 2012.

Wells Fargo appears out of the woods, Housing Wire reported. Wells Fargo's strong earnings results come shortly after the lender's agreement with Fannie Mae on December 30, 2013, which was fully covered through previously established mortgage repurchase accruals, that resolved substantially all repurchase liabilities related to loans sold to Fannie Mae that were originated prior to January 1, 2009.

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