U.S. Agency To Sue Big Banks Over Mortgages: Report
A U.S. agency is planning to sue more than a dozen banks, alleging they misrepresented the quality of mortgage securities they packaged and sold to investors before the 2008 financial crisis, the New York Times reports.
The newspaper said the Federal Housing Finance Agency — which oversees mortgage finance companies Fannie Mae and Freddie Mac — could file the suit as early as Friday.
The yet-to be filed suit will target Bank of America, Goldman Sachs, JPMorgan Chase, Deutsche Bank and others, the newspaper reported, citing three unnamed sources.
The FHFA, which was created in July 2008, is expected to argue that the banks failed to do due diligence and missed evidence that borrowers' stated income was either inflated or falsified.
The newspaper said the regulator will seek billions of dollars in compensation.
Bank of America, Goldman Sachs and Morgan declined to comment when contacted by the New York Times. Deutsche Bank said it couldn't comment on a suit that officials haven't seen, and which hasn't been filed.
According to the Times, some financial services executives argued that the losses incurred were part of the global financial downturn and that Fannie and Freddie were aware the securities weren't risk-free. Fannie and Freddie lost more than $30 billion US, partly due to the faulty mortgages, leaving U.S. taxpayers to cover the losses.
The suit is expected to be filed by Tuesday, the report said. Next Wednesday marks the third anniversary of the FHPA's takeover of Fannie Mae and Freddie Mac, and the report suggests regulators are worried it would be harder to make any claims against the bank after a three-year statute of limitations expires.
The FHFA has already filed a lawsuit against banking giant UBS.