HEADLINES:
July 08 2020
U.S. sues 17 banks over risky mortgages
02 September 2011

The U.S. government has sued the nation’s largest banks, along with a handful of other financial institutions and executives, for violating federal and state laws in the sale of home mortgage-backed securities.

Among the 17 institutions targeted by the lawsuits were Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., Goldman Sachs.

Home mortgage-backed securities were risky investments whose collapse after the real-estate bust helped fuel the financial crisis that erupted in late 2008.

The lawsuits were filed on Friday by the Federal Housing Finance Agency, which oversees mortgage buyers Fannie Mae and Freddie Mac.

The reports suggest that the government would seek to be compensated for billions of dollars in losses. The government said the banks misrepresented the quality of the mortgage securities.

The New York Times and The Wall Street Journal said the Federal Housing Finance Agency, which oversees mortgage buyers Fannie Mae and Freddie Mac, could file a lawsuit within days.

The lawsuits come as a result of past claims from the FHFA. Last year, the FHFA issued 64 subpoenas to various entities seeking documents related to mortgage-backed securities in which the Fannie and Freddie had invested.

The agency said at the time the documents would enable it to determine whether the banks and other financial entities were liable for losses they had suffered from their investments. FHFA said it expected to recoup funds, which would be used to offset payments made by the U.S. Treasury to Fannie and Freddie.

Fannie Mae and Freddie Mac are viewed as critical to the mortgage market, because they buy mortgages loans and mortgage securities issued by the lenders.

 

 

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