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TheStreet Open House

10 Regional Banks Swimming In Foreclosures

NEW YORK ( TheStreet) -- TheStreet has identified the 10 regional U.S. banks with highest balances of residential loans in some stage of foreclosure, as most large players sped-up the process of working through their mortgage mess.

Most of the recent media coverage has focused on lingering scrutiny of foreclosure processes at the "big four" U.S. Banks, all of which saw increases in the mortgages in foreclosure during the second half of the year, although the pace slowed in the second and third quarters as the media, state attorneys general and the public caught onto some sloppy practices by mortgage servicers seeking to seize collateral.

The bank with the highest total unpaid principal balance of loans secured by one-to-four family properties in some stage of foreclosure as of December 31 - according to data from Securities and Exchange Commission filings supplied by SNL Financial - was JPMorgan Chase (JPM), with $23.1 billion. This was an increase of 16% during the fourth quarter and 23% from a year earlier. In its annual 10-K filed with the SEC on February 28, JPMorgan said it expected to "incur additional costs and expenses in connection with its efforts to correct and enhance its mortgage foreclosure procedures," as well as "significant legal costs in responding to governmental investigations and additional litigation." The company also estimated that "reasonably possible losses" in excess of legal reserves already established could range as high as $4.5 billion.

The bank holding company with the second highest principal balance of residential mortgage loans secured by properties in foreclosure was Bank of America (BAC), with $20.6 billion, which was a 20% increase from a year earlier. Although CEO Brian Moynihan was upbeat at an investor presentation on Tuesday, saying the company's "normalized" earnings could range as high as $40 billion a year before taxes, several analysts expressed concerns over the company's lingering mortgage put-back risk, as several investor groups press the company to buy back mortgage-backed securities originally issued by Countrywide (which Bank of America acquired in July 2008), or pay compensation.

Next is Wells Fargo (WFC), which had $17.9 billion in residential mortgage loans secured by properties in foreclosure as of December 31, increasing 18% from a year earlier. In its 10-K filing, the company said "it is likely that one or more of the government agencies will initiate some type of enforcement action against Wells Fargo, which may include civil money penalties," stemming from investigation's of foreclosure practices. Wells Fargo also said that seven class action suits and "several individual borrower actions" were filed late in 2010 and early this year, over its role as a mortgage servicer.

Citigroup (C) had a far lower $7 billion in residential mortgages with collateral in foreclosure as of December 31, although this was an increase of 11% in the fourth quarter and 34% from a year earlier. The Wall Street Journal reported on March 3 that Citi was among the large mortgage servicers that were sent a proposal drafted by the U.S. Justice Department, other unnamed federal agencies and state attorneys general, outlining changes to loan servicing practices that were meant to stem foreclosures.

Moving beyond the big four, here are the 10 regional bank holding companies with the highest unpaid principal balances of one-to-four family residential loans secured by homes in foreclosure, as of December 31:

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