U.S Agency Set to Sue World’s Largest Banks Over Mortgages

September 2, 2011

U.S Agency Set to Sue World’s Largest Banks Over Mortgages

The U.S Federal Housing Finance Agency which is responsible for overseeing Fannie Mae and Freddie Mac is set to sue a dozen of the world’s largest banks, alleging the lenders misrepresented the value of mortgage securities sold on before the housing bubble burst, the New York Times reported Thursday on its website, citing three unnamed sources.

The Times says the U.S. Federal Agency will file lawsuits by early next week seeking billions of dollars in compensation from Bank of America, JPMorgan Chase and Goldman Sachs, in addition to Germany’s Deutsche Bank, among others.

According to the Times article, the agency claims the big banks bundled together mortgages, many of which should never have been granted in the first place, and then sold them on as securities without performing due diligence that would have revealed the borrowers incomes were deliberately overstated – making the mortgages a huge liability rather than a sound investment. Fannie Mae and Freddie Mac have operated under U.S. conservatorship since 2008, when they were seized amid subprime mortgage losses that pushed them toward insolvency.

The lawsuits aim to secure reimbursement for losses on securities held by Fannie and Freddie. Private investors have attempted to force banks to buy back mortgage-backed bonds

Bank of America, Goldman Sachs and JPMorgan declined to comment, the Times said. Frank Kelly, a spokesman for Deutsche Bank, told the newspaper the bank can’t comment on a suit it hasn’t seen or hasn’t been filed, according to the report.

Publisher: Salient News