NEW YORK ( TheStreet) --The earnings outlook for banks is cloudy once again amid a deteriorating macroeconomic environment, with one pressure point on earnings is certainly not showing signs of easing.
Banks could face $130 billion in mortgage repurchase losses, according to FBR Capital analyst Paul Miller, up from an earlier estimate of $110 billion, as mortgage giants Fannie Mae and Freddie Mac show "continued aggressiveness" in forcing the industry to buy back mortgages sold during the peak of the housing boom under defective underwriting standards.
FBR expects Bank of America (BAC - Get Report), JPMorgan Chase (JPM - Get Report) Citigroup (C - Get Report), Wells Fargo (WFC - Get Report) and SunTrust Banks (STI - Get Report) to absorb 68% of the total repurchase requests.
Bank of America in particular may have to raise estimates for repurchase losses after a recent court ruling placed the burden of proof of losses due to a representations and warranties breach on banks instead of bond insurers.FBR raised its loss estimate for the bank to $53 billion from $42 billion. "With the exception of Bank of America, we expect the larger banks will likely be better able to absorb the repurchase losses with limited pressure to ROEs