Obama Administration Sues Big Banks for Mortgage Fraud…Finally

Monday, September 05, 2011
(photo: blog.grain-of-salt.com)
Three years after Wall Street nearly collapsed after investing in risky home loans and dubious securities, the Obama administration has finally decided to go after the nation’s largest banks, as well as several international institutions, for mortgage fraud.
On Friday, the Federal Housing Finance Agency (FHFA), which oversees the mortgage giants Fannie Mae and Freddie Mac, sued 17 institutions, including Bank of America, Citigroup, JPMorgan Chase and Goldman Sachs, as well as Deutsche Bank, The Royal Bank of Scotland and Société Générale. The defendants are accused of misrepresenting the quality of mortgage securities they sold during the housing bubble.
FHFA is expected to seek billions of dollars from the banks to help recover what the U.S. government spent to shore up Fannie and Freddie, which lost more than $30 billion.
Previous to these lawsuits, the agency in July went after UBS, another major mortgage securitizer, seeking to recover at least $900 million in federal court. That case is still pending. In May federal prosecutors sued Deutsche Bank for $1 billion for “recklessly” lying about the quality of loans.
In addition to battling the government in court, the banks are facing demands from private investors who want the institutions to buy back tens of billions in bad mortgage-backed bonds.
-Noel Brinkerhoff
U.S. Is Set to Sue a Dozen Big Banks Over Mortgages (by Nelson Schwartz, New York Times)


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