U.S. Set To File Suits Against Big Banks Over Mortgages

WASHINGTON - The agency that oversees 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 on 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.

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[Jannsmoor]

11:19 AM on 10/07/2011

Suits will contribute to further losses? What? The big banks are making huge profits and paying huge bonuses. We need a financial transactions tax.

[Charles Deihl]

03:23 PM on 09/24/2011

Banks are getting people to Modify their loans now,but with a Statement in the Contract that they still can Foreclose with out Notice to the Homeowners and even if they are paying on their loan.Wells Fargo is my FHA/HUD Home Loan mortgager and that was the clause in the statement.And now I'm getting paper work with the Loan Number Blacked out.Nothing but Criminal Activity with them.

[lullu]

02:10 PM on 09/05/2011

This is going to get very messy. The banks deliberately lent money to people who they knew would not be able to pay. We (the tax payer) bailed them out and now they won't lend. There are a lot of politicians who were in on this. If the banks are going to be sued, all the major players who walked away with hundreds of millions should be sued too. Maybe they will be but I am not holding my breath.

[IndyVoter777]

08:56 AM on 09/06/2011

Why isnt Barnet Frank who FORCED Fannie and Freddie to lower the lending standards under the guise of equality being blamed for this mess?

Maybe the banks did things wrong and deserve to pay but the ho mess starts with Barney.

[Jannsmoor]

11:22 AM on 10/07/2011

Because you have confused Barney Frank with George Bush. Bush was the President, not Frank. Frank was, and is, one of 435 members of the House. You need to google Bush and FHA until you find the reporting on Bush pushing FHA to buy lower quality mortgages.

[hangdogit]

02:20 AM on 10/08/2011

Can you identify any bank that deliberately issued a mortgage to a homeowner that they knew could not repay -- and was forced by the government to do so? Or any that was forced to issue a liars loan? Or issue a loan for 110% of home value?

[stacyoh]

12:15 PM on 09/05/2011

900 million? is that all? and you know that if they start with that figure it will be settled for even less and that will be a mere drop in the bucket for most of these banks. what about jail time? why isn't there a criminal investigation going on brought forth by attorney general eric holder? i guarantee that if one or two of these big ceo's were sent to a federal maximum security prison (not the country clubs for white collar criminals) there would be a change of tune.

"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". really? my first reaction to that statement is "let's have a pity party, one two three, AAAAAWWWWWWWW!"

[whyus]

10:38 AM on 09/05/2011

Thank you, the Democratic Administration. It's about time. And it would be the 12th of Never in a Republican Administration. Let's count our blessings, folks, even though they may sometimes seem few and far between lately. At least we are trying to move in the right direction.

[Jannsmoor]

11:23 AM on 10/07/2011

Fanned for using "12th of Never" to describe Teapublican ownership by the rich.

[HopeWFaith]

11:18 PM on 09/04/2011

They can't file these suits fast enough to suit me. I would like to see all of these mentioned banks put out of business. It's not like there is a shortage of bankers to take over any leftover assets.

I did a refinance and was lied to by the agent handling the loan process, when she promised me that I could in fact expect her to give me the lowest rate out there (as I kept checking on them over the weeks thru the process and asked her specifically about this), since rates were going down every few weeks or months, back then. Naturally, she denied this conversation, when I asked for the 4.25 rate, and when I went to her boss's boss to get the lower rate applied, he denied any chance she could have possibly lied to me. Then he gave me a quarter of a point reduction.

Right, she did not lie. Banks' mortgage departments are just in the business of lowering a rate with no cause. Right.

[Barry Harper]

12:44 AM on 09/05/2011

Figures don't lie ,but lairs do figure . It happens al the time when there is money involved !!!

[tuberider]

08:58 PM on 09/04/2011

My suit against whoever/whatever cost a fortune and it never went anywhere.

[srooge]

06:58 PM on 09/04/2011

Banks will win

[Hugo Stiglitz1]

05:37 PM on 09/04/2011

Wheres Dick Fuld? Skiing? Wheres Hank Paulson? Spending his 2 Trillion? gimmy a friggin break. Bad enough we got a mouthful, but now we have to swallow?

[Hugo Stiglitz1]

05:33 PM on 09/04/2011

"...seeking to recover at least $900 million for taxpayers.."
So they can give it back to the wealthy in tax breaks. What a scam

[BassMonk]

02:24 PM on 09/04/2011

We need indictments against (probably thousands of) individuals for felony fraud, and revocation of corporate charters where principals of the corporation are involved.

[iam99]

12:55 AM on 09/04/2011

And , exactly whose idea was if tor the banks to securitize crap as AAA?
Somebody knew. WHO?

The whole world needs to know!

[srooge]

12:40 AM on 09/04/2011

FINANCIALTERRORIST

[giwel7]

09:35 PM on 09/03/2011

it is curious that deutsche is accused of pooling trusts with fraud and at the same time are named "trustee" for other banks trusts that are also fraudulant?

[Anita Carr]

03:56 PM on 09/03/2011

SOME OF THE ACTUAL LAWSUITS ARE POSTED HERE:

http://www.scribd.com/doc/63879410/US-GOVT-SUES-BOTH-JPMORGAN-CHASE-AND-DEUTSCHE-BANK-TWO-LAWSUITS-BY-FHFA-SEPT-2011

http://www.scribd.com/doc/63879937/US-GOVT-SUES-BANK-OF-AMERICA-AND-ALSO-COUNTRYWIDE-READ-BOTH-LAWSUITS-HERE-FHFA-SEPT-2011

http://www.scribd.com/doc/63880535/US-GOVT-SUES-BOTH-GOLDMAN-SACHS-AND-CREDIT-SUISSE-READ-BOTH-LAWSUITS-HERE

[GetRealSoon]

05:00 PM on 09/03/2011

Thank you. Fan & Fav

[giwel7]

09:35 PM on 09/03/2011

any morgan stanley links? thank you