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Stripper Loans and Mortgage Smoking Guns

Stocks in this article: CBACJPMWFCMBICS

MBIA also cited "rampant fraud" in the sample, which included borrowers misstating their income and other loans, and also indicating the underlying properties would be primary residences rather than investments.

A call to Credit Suisse seeking comment wasn't immediately returned.

With an endless array of poor credit policy decisions, lack of compliance with agreed-upon credit policies and underwriting standards, sloppy documentation and other cutting-of-corners, not to mention various types of fraud, it is no wonder that the process of working through the mortgage mess is taking so long.

The largest U.S. bank holding companies have huge mortgage securitization exposure, and although we are likely to see an easing of regulatory pressure as the big banks settle with the federal regulatory agencies and states' attorneys general, the mortgage putback claims will take many more years to work through the courts.

The large banks' potential exposure on securitized mortgages is huge. According to its regulatory Consolidated Financial Statements for bank holding companies (FR Y-9C) filed with the Federal Reserve, Bank of America (BAC) had $96.9 billion in one-to-four family mortgages serviced for others that were in the process of foreclosure as of March 31.

JPMorgan Chase (JPM) reported $63.2 billion in one-to-four family mortgages serviced for others that were in the process of foreclosure as of March 31.

Wells Fargo (WFC) reported $35.9 billion in one-to-four family mortgages serviced for others that were in the process of foreclosure as of March 31.

Citigroup (C) reported $10.2 billion in one-to-four family mortgages serviced for others that were in the process of foreclosure as of March 31.

It looks like there's plenty of blame to go around.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

To submit a news tip, send an email to: tips@thestreet.com.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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