Foreclosure Delays May Cost U.S. Banks Up to $6 Billion, FBR's Miller Says

Faulty foreclosures may cost U.S. lenders $2 billion for every month that home seizures are delayed and the tab could reach $6 billion, according to Paul Miller, the bank analyst at FBR Capital Markets.

Investigations of how banks are seizing homes may prolong foreclosures by as much as three months, at a rough cost of $1,000 per month for each property in the pipeline, Miller, a former bank examiner, said in an interview today. The biggest firms likely need to add staff to comb through the files, costing them each $1 million a year, he said.

“The real true cost is not the expenses, it’s the drag in the foreclosure system,” Miller said.

Attorneys general, consumer groups and some lawmakers have pressed mortgage firms to follow Bank of America Corp., the biggest U.S. lender, which last week suspended all foreclosures to check whether faulty documents were used to confiscate homes. JPMorgan Chase & Co. and Ally Financial Inc.’s GMAC Mortgage unit froze seizures or evictions in 23 states.

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