Government Prepares To Sue Banks Over Mortgages
September 2, 2011 by UPI - United Press International, Inc.
WASHINGTON, Sept. 2 (UPI) — The federal government will sue a dozen U.S. banks, charging they misrepresented the quality of mortgage securities sold in the housing bubble, insiders said.
The Federal Housing Finance Agency lawsuits, expected to be filed soon in federal court, target Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, three people knowledgeable about the matter told The New York Times.
The lawsuits arise from subpoenas the FHFA issued to banks a year ago and seek billions of dollars in compensation, the Times reported Thursday.
The FHFA oversees mortgage giants Fannie Mae and Freddie Mac, which reported losing more than $30 billion because of the deals. The losses were borne mostly by taxpayers.
The lawsuits were to be filed either Friday or Tuesday, shortly before a deadline expires for the housing agency to file claims.
The suits allege the financial institutions, which assembled the mortgages and marketed them as securities to investors, didn’t perform the due diligence required under securities law and missed evidence that borrowers’ incomes were either inflated or falsified.
When the housing bubble burst, many borrowers couldn’t pay their home loans and the securities backed by the mortgages plunged in value.