Still, costs probably will come down. Bank of America, which has booked almost $50 billion in costs since 2007 including refunds and litigation tied to defective home loans and improper foreclosures, said last week that it has dealt with most of those expenses.
Faulty mortgages have cost five banks -- Wells Fargo, Bank of America, JPMorgan, Citigroup and Ally Financial Inc. -- at least $84 billion since 2007, according to data compiled by Bloomberg. In the second half, the four largest mortgage lenders reported about $16 billion of added costs.
“Banks with outsized environmental costs are best positioned to see operating leverage in 2013, as these costs decline,” Goldman Sachs analysts led by Richard Ramsden wrote in a Jan. 3 report. They defined those expenses as mortgage foreclosure and legal costs, and loan buybacks. Declines will be coupled with mortgage revenue that should “remain strong throughout 2013, as spreads remain wide and volume remains resilient,” the analysts wrote.
Goldman said that banks in the best position to benefit this year include Atlanta-based SunTrust Banks Inc., Bank of America, Citigroup and Memphis, Tennessee-based First Horizon National Corp.
Wells Fargo has been the biggest beneficiary of a robust mortgage market. The largest U.S. home lender originated nearly 1 in 3 mortgages as of September and reported a 24% rise in fourth-quarter profit Jan. 11. Net gains on origination totaled $2.8 billion in the fourth quarter. In all of 2012, the firm recorded about $11.6 billion in mortgage banking income.
Mortgage banking could bring in another $10.9 billion this year, Chris Kotowski, a New York-based bank analyst with Oppenheimer & Co., estimated in a Dec. 20 report. The top four lenders, Wells Fargo, JPMorgan, U.S. Bancorp and Bank of America, will bring in $27.3 billion from mortgages this year, Kotowski projects.
John Stumpf, chief executive officer at the San Francisco-based bank, said this month there’s still “lots of opportunity” in mortgage lending.