Friday, September 2, 2011

Fed's Sue 17 Banks


Washington, DC -- The Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac (the GSEs), today filed lawsuits against 17 financial institutions, certain of their officers and various unaffiliated lead underwriters.  The suits allege violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities (PLS) to the Enterprises.  


Complaints have been filed against the following lead defendants, in alphabetical order: 
  1. Ally Financial Inc. f/k/a GMAC, LLC 
  2. Bank of America Corporation 
  3. Barclays Bank PLC 
  4. Citigroup, Inc. 
  5. Countrywide Financial Corporation
  6. Credit Suisse Holdings (USA), Inc. 
  7. Deutsche Bank AG
  8. First Horizon National Corporation 
  9. General Electric Company
  10. Goldman Sachs & Co.
  11. HSBC North America Holdings, Inc.  
  12. JPMorgan Chase & Co.
  13. Merrill Lynch & Co. / First Franklin Financial Corp.  
  14. Morgan Stanley
  15. Nomura Holding America Inc.
  16. The Royal Bank of Scotland Group PLC 
  17. Société Générale  
There are 17 separate suits all relating to mortgage origination and mortgage-backed securitization. Being separate actions the allegations vary from case to case.  Here's a sampling of allegations:
  • Loan-to-Value Data Was Materially False
  • Owner Occupancy Data Was Materially False
  • The Originators of the Underlying Mortgage Loans Systematically Disregarded Their Underwriting Guidelines
  • Failure To Conduct Proper Due Diligence
  • Defendants Incentivized to Fund Risky Residential Mortgage Loans
  • Material Misrepresentations and Omissions in the Offering Materials
  • Fraud


Fannie and Freddie want out of the bad deals.  Specifically FHFA is asking the courts for: 
  • Rescission and recovery of the consideration paid for the GSE Certificates, with interest thereon; 
  • Each the GSE's monetary losses, including any diminution in value of the GSE Certificates, as well as lost principal and lost interest payments thereon; 
  • Attorneys’ fees and costs; 
  • Prejudgment interest at the maximum legal rate; 
  • and in some cases Punitive damages. 
Plaintiffs' Counsel is Quinn Emmanuel Urquhart & Sullivan, LLP and Kasowitz Benson Torres & Friedman LLP


Follow this link to view legal filings: FHA Filings in PLS Cases, September 2, 2011
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