MANHATTAN (CN) – Government regulators charged with overseeing Fannie Mae and Freddie Mac filed 17 lawsuits in several courts against banks alleged to have caused the agency billions in losses with worthless mortgage-backed securities.
The 17 financial institutions sued by the Federal Housing Finance Agency are Ally Financial Inc. f/k/a GMAC, Bank of America, Barclays Bank, Citigroup, Countrywide Financial, Credit Suisse Holdings (USA), Deutsche Bank, First Horizon National, General Electric, Goldman Sachs & Co., HSBC North America Holdings, JPMorgan Chase & Co., Merrill Lynch & Co. / First Franklin Financial, Morgan Stanley, Nomura Holding America, the Royal Bank of Scotland Group and Société Générale.
Certain officers of these institutions and various unaffiliated lead underwriters are also named as defendants to the lawsuit, which allege violations of federal securities laws and common law.
FHFA filed the lawsuits in federal and state court in New York and federal court in Connecticut. In a statement on its website, the agency says the complaint is similar to one filed over a month ago against UBS Americas, which seeks damages and civil penalties under the Securities Act of 1933.
The complaints also allege negligent misrepresentation, and certain defendants face claims of violating state securities law or committing common-law fraud.
“The complaints filed today reflect FHFA’s conclusion that some portion of the losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities (PLS) are attributable to misrepresentations and other improper actions by the firms and individuals named in these filings,” the agency said in a statement. “Based on our review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the Enterprises for those securities.”
Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks regulated by FHFA provide more than $5.7 trillion in funding for the U.S. mortgage markets and financial institutions.