‘Banks were lying’ about loan quality – former inspector

Mortgage and foreclosure abuses have costs the country’s five largest lenders nearly $66 billion – and that number will likely double by the end of the fallout, according to a Bloomberg News report.

Bank of America Corp., whose CEO has referred to the situation as the “mortgage mess,” has faced the largest losses of any lender at $39.1 billion since the start of 2007, Bloomberg found. JPMorgan Chase & Co. followed with $16.3 billion, and Wells Fargo & Co. had $5.09 billion.

Paul Miller, an FBR Capital Markets & Co. analyst, told Bloomberg that he thinks the costs for all banks could surpass $121 billion when the final bill comes due for lax lending practices. He predicts that Bank of America, Wells Fargo, JP Morgan, and Ally Financial Inc. will face 60 percent of the burden (Bank of America alone may shoulder 33 percent of that).

“You’re not talking about improperly stapling together two documents, you’re talking about systematic fraud in the system,” Neil Barofsky, the former special inspector general for the U.S. Treasury’s Troubled Asset Relief Program, told Bloomberg News. “What this shows is that before the financial crisis, the banks were essentially lying to the purchasers of the mortgages about the quality.”