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Reuters reports: "The agency that oversees US mortgage markets is preparing to file suit against more than a dozen big banks, accusing them of misrepresenting the quality of mortgages they packaged and sold during the housing bubble."

Debra Dahlmer has been trying to get a loan modification through Bank of America for more than a year. (photo: Chris Arnold/NPR)
Debra Dahlmer has been trying to get a loan modification through Bank of America for more than a year. (photo: Chris Arnold/NPR)



US To Sue Big Banks Over Mortgage Securities

By Reuters

02 September 11

he agency that oversees U.S. mortgage markets is preparing to file suit against more than a dozen big banks, accusing them of misrepresenting the quality of mortgages they packaged and sold during the housing bubble, the New York Times reported Thursday.

The Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, is expected to file suit against Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among other banks, the Times reported, citing three unidentified individuals briefed on the matter.

The suits stem from subpoenas the finance agency issued to banks last year. They could be filed as early as Friday, the Times said, but if not filed Friday it said the suits would come on Tuesday.

The government will argue the banks, which pooled the mortgages and sold them as securities to investors, failed to perform due diligence required under securities law and missed evidence that borrowers' incomes were falsified or inflated, the Times reported.

Fannie Mae and Freddie Mac lost more than $30 billion, due partly to their purchases of mortgage-backed securities, when the housing bubble burst in late 2008. Those losses were covered mostly with taxpayers' money.

The agency filed suit against UBS in July, seeking to recover at least $900 million for taxpayers, and the individuals told the Times the new suits would be similar in scope.

A spokesman for the Federal Housing Finance Agency was not immediately available for comment.

The Times said Bank of America, JP Morgan and Goldman Sachs all declined comment. A Deutsche Bank spokesman told the Times, "We can't comment on a suit that we haven't seen and hasn't been filed yet."

The practice of subprime lending, wherein mortgage brokers lowered their standards to entice homebuyers to take out large mortgages to buy more expensive homes than they could afford, was a root cause of the mortgage market implosion.

News of the suit could have a negative impact on stocks of the banks in question on Friday. JPMorgan Chase, Bank of America and Goldman Sachs are traded on the New York Stock Exchange, while Deutsche Bank is traded on the German exchange.

S&P 500 stocks index futures were trading down 0.6 percent in Asia. U.S. Treasury futures also ticked higher..

The Times report said investors fear that if banks are forced to pay out billions for mortgages that defaulted, the suit could sap earnings for years and contribute to further losses across the financial services industry.

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Comments  

 
+20 # Barbara K 2011-09-02 10:35
Wow! Finally some good news. Hope they get some jail time, and have to make restitution to all their victims, who were left homeless by their crooked, greedy activities. Also, we can avoid using banks all we can, and use Credit Unions. I did that some time ago, I use my local Credit Union, and my local smalltown bank. We don't have to put up with their raunchy treatment. We have other choices, and I just named only a couple of them. Another one is to buy gasoline from American Oils. Don't buy Gas from foreign oil and gas distributors. I have a list from online and use that for reference. No need to provide for countries who hate us. Keep American Oil in America, instead of putting it on the world market.
VOTE STRAIGHT DEMOCRATIC
 
 
+4 # Fair Elections Now 2011-09-02 13:02
Does anyone know if this means the NY Fed and the Obama Administration have backed off the proposed settlement between the banks and the state AGs because the NY AG wouldn't go along with it?
 
 
0 # TGMisanthrope 2011-09-03 01:20
Quoting Barbara K:
VOTE STRAIGHT DEMOCRATIC

_____________

I respectfully disagree, Barbara K. Although there are fewer corrupt Democrats than Republicans there are still plenty of dirty Dems. I feel that people should think critically and vote for the best candidate, Democrat, Republican, Independent, Green, whatever.
 
 
+6 # abdullahiedward 2011-09-02 13:37
Hope they do better on this one than they did against "Big Tobacco". By the way, have they paid yet??? it's only about 20 years isn't it????
 
 
+2 # advocate 2011-09-02 14:01
The proposed settlement is a joke, just like all else associated with this financial fiasco----I have been in litigation against BofA, et al for almost three years and am headed for mediation (as the plaintiff---Dav id vs. Goliath)
 
 
+5 # giraffee2012 2011-09-02 15:38
I bet none of the bankers go to jail.

OMG Cantor is on MSNBC and he's double - speaking again He asked for help in 2004 without balancing -- If Cantor's rhetoric comes to the floor - I hope it does -- I think smoke will be coming out of the Congress. But the money will go out to the states anyway -- rest assured.

But will Cantor's rhetoric hurt the TP? Only if the Dems "man up"
 
 
+3 # abdullahiedward 2011-09-02 16:37
Lets hope they make out better than they did in the case against "Big Tobacco"!!!
 
 
+7 # DPM 2011-09-02 18:40
"The Times report said investors fear that if banks are forced to pay out billions for mortgages that defaulted, the suit could sap earnings for years and contribute to further losses across the financial services industry." You know what? We're already hurtin' down here and it looks as though the financial sector plans for "us" will make it worse in the future. So, let the fat cat gamblers take a big hit, then listen to them threaten that we will pay if they do. I've got little left to take and if it means some egotistical rich s.o.b. at J.P. Morgan loses everything, they can take what I have! Put their heads on pike poles in front of the Consumer Protection Agency!
 
 
+1 # giraffee2012 2011-09-03 09:58
If one of these "too big to jail" goes down (all the way) - nothing bad will happen to us bc if nothing results from these lawsuits we will continue to hear the Cantor's "double speak" about no taxes for rich + cut the middle/poor down further.

THERE are stupid people who vote the Cantors, Boehners, the turtle from KY, etc (assuming the voting in their states are not tampered with) into office.

SO - YOUR duty, folks, is to VOTE 2012 and I agree with Barbara K - vote Dem (not blue coat Dem - but one is better than a TP).

When you know the TP is funded by the Koch brothers + signature to Norquist (over their OATH to uphold the Constitution) -- AND you vote for such a whore, then you (or your children) will some day know you voted in the same kind of brown shirts serving under Hitler.

If you have a GOP/TP governor - make sure you get all those who don't have IDs - registered. YES, YOU, go to their streets with forms from the DMV so they can get registered. We need them and the TP has announced they will squash Dem votes when they can.

Just vote, darn it, and be sure your vote is counted. I am going to volunteer to count for the first time. Can you spare a day to do same? A few hours?
 

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