A Week You Can Bank On (NYSE: BAC) (NYSE: WFC) (NYSE: PNC) (NYSE: C) (NYSE: USB)

LIVERPOOL - Major banks report earnings next week. The banks have been beaten to a pulp as of late as investors look for information regarding the foreclosure scandal. Investors will be clued in to conference calls from BAC, WFC, C, USB, PNC.

All these stocks were brutally punished last week (except USB) but clarity will be given this week.

The banks stocks could sell off further on the news.

Banking (NYSE:WFC) on America (NYSE:BAC) (NYSE:C)

Bank of America Corporation (NYSE:BAC) hit a fresh 52-week low on Friday as worried that the foreclosure crisis may eat into BAC profit. The scandal involves foreclosures on houses by the banks without the necessary documentation and the foreclosure of houses using robo-signers which is when workers involved in forclosures indicate the documentation is present when it is not. J.P Morgan the second largest bank in the U.S. already took a charge in their third quarter report relating to the mortgage foreclosure scandal. Despite this charge JPM posted $4.4 billion of profit. Investors are afraid that Wells Fargo will have to report a similar charge. It has been reported Xee Moua a vice president of loan documentation for Wells Fargo, the second-largest US mortgage servicer, had pushed through 500 foreclosures a day.

The financial sector has continued to be beaten down since mid April. The stock reached a low of $11.74 today, valuing the company's market capitalization close to Citigroup levels. Citigroup currently has a market capitalization of only $6 billion dollars less than BAC despite having less assets and a lower book value.

To see the BAC report Click Here

To see the Wells Fargo Report Click Here

PNC (NYSE:PNC) Wells Fargo (NYSE:WFC) Citigroup (NYSE:C) J.P. Morgan (NYSE:JPM) Bank of America (NYSE:BAC) U.S Bancorp (NYSE:USB) Face "Robogate"

Stocks of the largest financial institutions were off as the markets open. Wells Fargo was down 4%, JPM 3%, BAC 4%, C 3.2% PNC 2.1% and USB is down 1.7%. The banks are being sold off on "Robogate" which is a foreclosure scandal that could hit many of the nations lenders.

The scandal involves foreclosures on houses by the banks without the necessary documentation and the foreclosure of houses using robo-signers which is when workers involved in forclosures indicate the documentation is present when it is not. This has caused an investigation into whether the banks have violated the law in certain states. Banks are known to be more at risk in the "so-called judicial states." The Judicial States make it mandatory for a lender to go to court before it can foreclose on a loan. In non-judicial states, banks aren’t required to submit anything to the court until they are sued by a homeowner seeking to stop a foreclosure. The problem can be two-fold for the banks. The first one being that they may have violated the law in certain states and the second one being they do not have the necessary documentation required for future foreclosures.

Some of the banks are having trouble of identifying the owner of the actual mortgages. This was caused by the securitization of the mortgages industry which also led to the financial crisis in 2008. The securatization is the repackaging of mortgages into smaller pieces and then selling them like bonds or stocks to investors. The issue would be if banks have submitted forged documents in order to get the foreclosure processed and if the banks have the documents necessary to foreclose on future loans. All of these problems are rectified if the banks prove they own the mortgage.

One would hope that a bank which primary business is usually mortgages would keep appropriate documentation to prove that they own their most important asset. If the banks do not have this documentation who is the customer and who is the bank?