Iridian Asset Management, a financial firm based in Connecticut, believes recent foreclosure problems at major mortgage lenders will have an "existential impact" on those companies and is shifting investments in light of that threat, according to a letter sent to clients in October. Bank of America (BAC), JPMorgan Chase (JPM), Ally Financial (GJM), and Wells Fargo (WFC) are currently refiling foreclosure affidavits. Along with Citigroup (C), the big-four banks handle 60% of outstanding first-liens in the market, according to Iridian, which manages $7.1 billion in client funds as of June. With these mortgage servicers and others facing political pressure, investigations from the 50 state attorneys general offices and reviews from nearly every federal and state regulator, Iridian said mortgage servicers will be seen as the villains of the mortgage-backed securities crisis of 2010 just as lenders and originators were the "bad actors" of the MBS crisis in 2008. "As a result, these companies (and there are only a handful or two that are publicly traded) face enormous, and in some cases existential, regulatory and legal risks to their core operations," according to the letter. Iridian then is betting resolutions will not come soon. Together with the billions of dollars set aside for mortgage put-back claims and the nearing cases against mortgage servicers from those investigations, Iridian said the biggest financial institutions will be at odds for years. "We are making a substantial investment in this theme because we believe that we have excellent visibility into timely and material catalysts that have an existential impact on a range of publicly traded companies," according to the letter. "We have established our positions with a range of securities that we believe are appropriately matched for the catalysts at work in each individual case." While Iridian said there is plenty of liquidity available if they are wrong, they don't expect to use it. "We do not believe that we will have to wait two to three years to get paid on our ideas if we are right," according to the letter. Write to Jon Prior.