US Sues Major Banks
Over Faulty Mortgage-Backed Stocks
September 18, 2011
U. S. government has filed lawsuits against 17 major banks, saying the
government lost money — and the 2008 financial crisis was sparked — in
part because these banks made their mortgages seem less risky.
The Federal Housing Finance Agency said Friday their review shows that
the banks provided marketing and sales material that misrepresented the
quality of mortgage-backed securities.
The banks bundled mortgages and sold them to investors, including
government-backed mortgage companies Fannie Mae and Freddie Mac during
the housing bubble.
Media reports earlier said the FHFA will argue the banks missed evidence
the homeowners' incomes were inflated or falsified. When those
homeowners' were unable to pay their mortgages, the securities lost
Fannie Mae and Freddie Mac lost more than $30 billion combined on the
securities. With this lawsuit, the FHFA is seeking repayment from the
banks for those losses.
The banks include Bank of America, JPMorgan Chase and Goldman Sachs and
others. The FHFA says the lawsuit also names some officers of these
banks, as well as some unaffiliated loan underwriters.
FHFA was created in 2008 to oversee the two mortgage giants. The agency
is filing the lawsuits now because a deadline for it to file any claims
runs out next Tuesday.
Last month, insurance giant American International Group filed a $10
billion lawsuit against Bank of America and two of its subsidiaries,
Countrywide Financial and Merrill Lynch. AIG alleges it was also misled
about the real value of the mortgage-backed securities it bought.
In addition to the impending lawsuits, the big banks are also
negotiating a $20 billion settlement by attorneys general in all 50
states to address their practice of offering high-risk loans to home
buyers who would not have otherwise qualified for a conventional
of Use | Copyright
© 2002 - 2011
SM CORPORATION. All
rights reserved. |