Lawsuit For the Big Banks?
The government on Friday sued 17 financial firms, including the largest U.S. 
banks, for selling Fannie Mae and Freddie Mac billions of dollars worth of mortgage-backed securities that turned toxic when the housing market collapsed.
Wow, what can you say? The banks got us in a housing crisis. Who can get us out?
Among those targeted by the lawsuits were Bank of America Corp., Citigroup
Inc., JP Morgan Chase & Co., and Goldman Sachs Group Inc. Large European banks including The Royal Bank of Scotland, Barclays Bank and Credit Suisse who were also sued.
The lawsuits were filed by the Federal Housing Finance Agency. It oversees Fannie and Freddie, the two agencies that buy mortgages loans and mortgage securities issued by the lenders.
The total price tag for t he mortgage-backed securities sold to Fannie and Freddie by the firms named in the lawsuits: $196 billion.
No small change, that is for sure…
The government didn’t say how much it is seeking in damages. It said it wants to have the securities sales canceled and wants to be compensated for lost principal, interest payments as well as for attorney fees.
The government action is a big blow to the banks, many of which have seen their stock prices fall to levels not seen since the financial crisis in 2008 and 2009. Until now, the stocks have been undermined mostly by unrelated worries about the U.S. and European economies.
After Bank of America, JPMorgan Chase was listed in the lawsuits with the second-highest total at $33 billion. Royal Bank of Scotland followed at $30.4 billion.
Bank of America has already paid $12.7 billion this year to settle similar claims. Admittedly Warren Buffett’s money helped BofA but clearly not enough.
In a statement Friday, Bank of America rejected the claims in the government’s lawsuits.
Fannie and Freddie invested heavily in the mortgage-backed securities even after their regulator said they didn’t have the needed risk-management capabilities.
That made bank stocks fell sharply on Friday as news of the government’s lawsuits emerged. Bank of America tumbled 8.3 percent, JP Morgan Chase fell 4.6 percent, Citigroup lost 5.3 percent, Goldman shed off 4.5 percent and Morgan Stanley’s ended down 5.7 percent.
The FHFA said the mortgage-backed securities were sold to Fannie and Freddie based on documents that “contained misstatements and omissions of material facts concerning the quality of the underlying mortgage loans, the creditworthiness of the borrowers, and the practices used to originate such loans.”
The FHFA filed a similar lawsuit in July against Swiss bank UBS AG, seeking to recoup more than $900 million in losses from mortgage-backed securities.
If this all goes through, I hope that it can help Fannie and Freddie to continue to help others as there have been so many people that have been affected by the boom and burst of the bubble.
Experts are saying that the banks will be distracted by this and will need to settle asap.
The banks got us in this mess, email us at [email protected] to get you out, San Diego has voted me and my team #1 in San Diego and we fight the fight everyday to keep homeowners from being foreclosed on.
