U.S. suing banks over mortgage practices

After Fannie Mae and Freddie Mac suffered more than $30 billion in losses stemming from bad mortgage-backed securities banks sold investors at the peak of the housing bubble, the Federal Housing Finance Agency has filed suits against more than 12 major banks involved. The financial institutions being accused of misrepresenting the quality of the mortgage-backed securities that proved to be toxic for investors include Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank.

Private investors were already trying to get the banks to buy back billions of dollars worth of soured mortgage-backed bonds, The New York Times reported. But the latest lawsuits are seeking reimbursements for the losses on securities Fannie Mae and Freddie Mac experienced as well.

In addition, 50 state attorneys general are negotiating a settlement with mortgage servicers to address controversial lending practices such as robo-signing. The news source reported that the attorneys general and federal officials are seeking at least $20 billion in compensation to be used to reduce the mortgages of current homeowners facing foreclosure.

According to The Associated Press, last year the FHFA issued 64 subpoenas in an effort to find documents related to the mortgage-backed securities that caused the major losses to Fannie Mae and Freddie Mac. The agency said the documents would help determine which financial entities were responsible for the losses to investors and help recoup funds that could be used to help Fannie and Freddie, which are indebted to the U.S. Treasury. The most recent lawsuits are a result of these efforts.  

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