Federal Housing Financing Agency (FHFA) Sues Banks over Mortgage Backed Securities


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It is news like this that makes it near impossible to predict the market correction.  Depending on what happens here, it could either mean the mortgage business gets cleaned up or that it will shut all mortgage lending down – thus sending us into further housing slump…  Or it could just be a blip on the radar and not have any real impact.

We just spent Billions on bailing these banks now, now our Government is suing them?  Will we then need to bail these banks out after the lawsuit??  I don’t get it…

We are in uncharted waters here and I am not sure how this will play out…  I’ve got a gut feeling this is not going to help anyone out.  If we are not careful through this mess, we are heading in the direction where the only way you can get a mortgage is if the Government grants you one. (technically you give the mortgage lien on the property and receive the money or the note…)

The Federal Housing Finance Agency is ready to file suit against the nation’s largest banks, accusing the financial institutions of misrepresenting the quality of mortgage backed-securities sold in the run-up to the 2008 financial meltdown, The New York Times reported Thursday.

According to the article, the FHFA lawsuits will target Bank of America (BAC: 7.33 -7.33%), JPMorgan Chase (JPM: 34.92 -3.80%), Goldman Sachs (GS: 106.69 -4.88%) andDeutsche Bank (DB: 37.00 -4.15%) among other large MBS players.

Read Full Article from HousingWire

UPDATE:

The FHFA alleges these institutions, their executives and some lead underwriters violated federal securities laws, violated common law, failed to conduct proper due diligence and provided allegedly false information when selling these products.

What the FHFA seeks in recovery will not equal what the GSEs paid for the MBS sold. However, in each suit, the FHFA disclosed how much Fannie and Freddie bought from each particular bank and subsidiary in the case of BofA.

  • JPMorgan Chase: $33 billion
  • RBS: $30.4 billion
  • Countrywide: $26.6 billion
  • Merrill Lynch: $24.8 billion
  • Deutsche Bank: $14.2 billion
  • Credit Suisse: $14.1 billion
  • Goldman: $11.1 billion
  • Morgan Stanley: $10.5 billion
  • HSBC: $6.2 billion
  • Bank of America: $6 billion
  • BarCap: $4.9 billion
  • Citi: $3.5 billion
  • Nomura: $2 billion
  • Société Générale: $1.3 billion
  • First Horizon: $883 million

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