An estimate by Standard & Poor's rating agency puts the additional expected costs for major U.S. banks to settle mortgage-related issues at between $55 billion and $105 billion. The estimate is on top of previous settlements.
The analysis was based on S&P's review of earlier settlements and unresolved mortgage-related legal actions against Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley and other large banks.
The costs are expected to stem from continuing legal actions for the troubled residential mortgages banks originated or repackaged into securities and sold during the 2005-2008 timeframe leading up to the nation's financial crisis, S&P's analysis showed.
Despite the high estimates, the analysis stated that banks facing the largest legal exposure should be able to fund the settlements because they have remained profitable while paying earlier mortgage-related costs and continue to have "significant earnings power".
The major banks combined have an estimated $155 billion buffer composed of a capital cushion, representation and warranty reserves and funds set aside for litigation, S&P reported.
The anticipated costs already gave been factored into S&P's bank ratings and currently are not expected "to result in negative rating actions for U.S. banks," the analysis continued. But S&P added that major legal expenses related to mortgage problems has the potential to weaken a bank's business model and capital position through potential loss of key clients and employees.