Banks Face Two-Front War on Bad Mortgages, Flawed Foreclosures

``While federal regulators and state attorneys general have focused on flawed foreclosures, a bigger threat may be the cost to buy back faulty loans that banks bundled into securities... Fannie Mae and Freddie Mac, the largest mortgage-finance companies, may be owed as much as $42 billion just on loans they bought directly from lenders, according to Fitch Ratings. On top of that, investors in private mortgage bonds, including them, may collect as much as $179.2 billion, Christopher Gamaitoni, vice president of research at Compass Point Research & Trading LLC in Washington, said in an August report. That brings the total to more than $220 billion. ''