Bank of America (NYSE:BAC), Citigroup (NYSE:C), JPMorgan (NYSE:JPM), and Barclays (NYSE:BCS) have all been named in suits filed today by the Federal Housing Finance Agency over residential mortgage-backed securities. Also named in the suits, which accuse banks of misrepresenting the quality of mortgage securities they packaged and sold as bonds, are Nomura Holdings Ltd., HSBC Holdings (NYSE:HBC), and Credit Suisse (NYSE:CS).
The lawsuits seek damages for soured mortgage securities purchased by Fannie Mae and Freddie Mac, which the FHFA oversees. The FHFA claims the loans were sold based on false or missing information about borrowers and properties, and that in many cases, banks simply didn’t look into obvious misrepresentations of borrowers’ incomes on their applications, allowing many borrowers to take out loans they couldn’t pay back.
The lawsuits were filed this afternoon in Manhattan federal court. In the filings, the agency says that Fannie and Freddie bought $6 million in securities from Bank of America (NYSE:BAC), $24.8 billion from Merrill Lynch & Co., now owned by BofA, and $3.5 billion from Citigroup (NYSE:C). Fannie and Freddie were seized by the government in 2008 when sub-prime mortgage losses pushed them to the brink of insolvency.