The Federal Housing Finance Agency has filed suits against 17 financial institutions for selling government-controlled GSEs Fannie Mae and Freddie Mac around $200 billion in mortgage-backed securities (MBS) that later went south[1]. Word of the suit leaked early in the day last Friday, causing Bank of America, JPMorgan Chase and Goldman Sachs stocks to fall 8.3 percent, 4.6 percent and 4.5 percent, respectively. The actual complaints were not filed until close of business on Friday and the FHFA is seeking billions of dollars in damages and returns[2]. Mike Mayo, a Crédit Agricole analyst, says that the lawsuit is likely to add to the “uncertainty that dogs the industry” and accuses the FHFA of treating banks as a “big piñata [to] the effect of delaying the housing recovery.”
The suit hinges on claims that MBS sold to Fannie and Freddie did not meet due diligence responsibilities under securities law and that the financial firms in the suit “failed to identify proof that borrowers’ incomes were overstated or fake.” The toxic mortgages quickly plummeted in value as borrowers were unable to make payments. FHFA is suing, among others, Bank of America Corp, Goldman Sachs Group Inc, JP Morgan & Chase & Co, Citigroup Inc, Deutsche Bank AG, Barclays PLC, Nomura Holdings Inc, Morgan Stanley, Ally Financial Inc, Credit Suisse Group Inc, First Horizon National Corp, General Electric Co, the HSBC North America Holdings unit of HSBC Holdings, The Royal Bank of Scotland Group PLC and Société Générale SA.
Many analysts believe that this move could render attorney generals’ talks with big banks completely moot, as one of the biggest potential benefits of settling with the AGs is immunity from future liability in mortgage-related lawsuits[3].
Do you think that this lawsuit is a good idea, or should the FHFA hold off until other negotiations, like the bank settlement between the state attorneys general and robo-signing lenders, are resolved?
[1] http://www.nytimes.com/2011/09/03/business/bank-suits-over-mortgages-are-filed.html
[2] http://www.usamarketnews.com/featured/5927/fhfa-taking-action-against-big-banks-sues-17-banks-over-mortgage-losses.html
[3] http://blogs.reuters.com/felix-salmon/2011/09/02/how-the-fhfa-lawsuits-could-imperil-mortgage-settlement-talks/
Our gov’t is hell bent on finding fault, both the states and the fed. I would rather have the fed gov’t admit that the Fannie/Freddie hierachy did not do their due diligence when purchasing these mortgages and move on. They were duped and don’t want to admit it. How will this action benefit me, the consumer? My feeling? It will not benefit the people in general at all. In fact it will most likely have the opposite effect. It wasn’t so long ago the gov’t put some regulations on the credit card industry–and gave the big institutions 8 or 9 months to stick it to the people before the new regulations took effect. They found more ways to charge a fee for this and a premium for that. These big banks will probably react the same way if hit with a big fine (or little one).
The state AG’s who want to take care of their residents, are being kicked out of their suit. That tells me the majority of states are in their pockets too and everyone knows it. That’s why everyone else is lining up to get their few billion in fines; before someone can give them immunity.
The ‘slap on the wrist’ from any gov’t branch or state will not have an effect on the banks. Time for the people to grease up again, I just hope I get kissed first.
How can this be bad. Banks have not honored their agreements with state AGs (ref. Matso) so why wait ay longer. Criminal charges should be next.
maybe 2 compulsory units per year at the ivy league business school on integrity may help. They all knew exactly what was happening and the huge risk to their clients from both sides. BoA and Chase to their defense inherited most of the problem portfolio
They should be suing Congress since they are the ones that created this mess to began with. However, as the old saying goes:”It is what it is,” and now we see Government interference and buck passing at its worst.
Not only did the banks not do their due diligence, the mortgage brokers representing them encouraged the fraud. Too many small business owners who were starting to feel the pinch of the economy’s impending downturn were told “just give us your total revenue and we will state that it is income to you personally”. The banks then call you and talk about your fiduciary responsibility to them. This is totally out of control.
The law suits are a to little effort, but better than no effort. The state AGs efforts are nothing more than effort to allow the banks to buy their was out their criminal activities.
One post above notes that may of the banks didn’t originate the loans; true.
They bought and packaged the loans for sale to a government agency based upon certain standard. IF they were misled, then they can go back to their suppliers / loan originator, if they were misled as to the quality of what they purchased.
The taxpayers shouldn’t be on the hook because of the greed of the banks to make money for their middle man efforts. These loans don’t represent some great community investment efforts. They made money as money changers, that is good in a capitalistic society. If they violated the laws, they should face the same level as anyone else that commits such deceit, maybe like Bernie Madoff.
I believe that the banks have committed financial terrorism and fiscal crimes against the American people. We need retribution for homeowners and jail sentences to the perpatrators. Anything less is condoning the worst
white collar crime in our history. We need to bail out the homeowners not these corrupt financial monsters. Give the American people back the 7 trillion they absconded with to help citizens, the national debt and the international financial community. For some reason we think we need them. We do not need them. We need to get rid of them and close them down for fraud, deceipt and corruption.
Follow the money to the mastermminds of this scheme. and lock them up. Our financial system needs an over haul so that we have control over our money system. Get rid of the Federal Reserve and Megabanks and return banks to the states. This whole mess is a ponzi scheme bettween Wall Street, Banks and the Feds. I find it difficult to believe that we are not outraged at this conspiracy
I believe this Lawsuit to be irrelevant, the citizens have lost their possessions, and we have BAILED OUT the Banks. The country is in this turmoil, LONG before President OBAMA had taken office. This cycle began with President Regan ,and Presidnt Nixon,NOW someone notices that this is/was WRONG.
How many has suffered at the hands of BIG BANKS? If the Lawsuit is won, how many tax paying poor citizens victims will profit from the suit? If there will be no equity to access for the victims, they should not be allowed to collect any funds, UNLESS they allow current victims that are still on the bank’s roaster with a pending Foreclosure to be vindicated, and have his/her mortgage FORGIVEN IN FULL.
They should only file the Lawsuit after, they have met and discussed the situation and could not come to some agreement.
Good theater, the only question is who will be paying any attention to these court cases when the Commercial market starts falling like a stone?
Will there be anyone to pay any fines?
The bonuses are paid, those that collected them have since secured their ‘winnings’ and left the table.
WE all know that the banks pushed the loans through but we the people that took the loan knowing that we were not going to be able to make the payments need to face our part not to dismiss thebanks they have the heaveyer burdan and should pay even if it taks them down. New banks willrise from the ashes and Fannie Mea and Freddie mac are to take on there blame and should be done away with. But we all know what will happen most likly the banks will take the money way out some might go under and or change names and we know that the people will sufer. Darn Banksters.