The Federal Housing Finance Agency filed suit today against 17 of the world's largest financial firms, seeking to recover losses suffered by Fannie Mae and Freddie Mac on private-label mortgage-backed securities.
The suits, filed in New York federal or state court or federal court in Connecticut, target firms including Bank of America Corp., Citigroup, Inc., Deutsche Bank AG, Goldman Sachs & Co., JPMorgan Chase & Co., Merrill Lynch & Co. and Morgan Stanley, as well as their officers and lead underwriters.
The federal housing agency serves as conservator for Fannie Mae and Freddie Mac, and is is charged with preserving the companies’ assets on behalf of taxpayers.
Represented by lawyers from Quinn Emanuel Urquhart & Sullivan and Kasowitz, Benson, Torres & Friedman, the agency is seeking damages and civil penalties under the Securities Act of 1933, as well compensatory damages for negligent misrepresentation. Some of the complaints also allege state securities law violations or common law fraud.
“The complaints filed today reflect FHFA’s conclusion that some portion of the losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities (PLS) are attributable to misrepresentations and other improper actions by the firms and individuals named in these filings,” according to the agency’s press release, issued late Friday afternoon.
In the complaint against Bank of America, for example, the agency alleges that “Between September 30, 2005 and November 5, 2007, Fannie Mae and Freddie Mac purchased over $6 billion in residential mortgage-backed securities...Significant percentages of the underlying mortgage loans were not originated in accordance with the represented underwriting standards and origination practices and had materially poorer credit quality than what was represented in the Registration Statements.”
Goldman Sachs allegedly sold Fannie and Freddie over $11.1 billion in residential mortgage-backed securities, also “not originated in accordance with the represented underwriting standards and origination practices.”
Royal Bank of Scotland is alleged to have sold more than $30.4 billion in faulty mortgage-backed securities, while Merrill Lynch is blamed for about $25 billion and Deutsche Bank for $14.2 billion.
The companies being sued are:
- Ally Financial Inc. f/k/a GMAC, LLC
- Bank of America Corporation
- Barclays Bank PLC
- Citigroup, Inc.
- Countrywide Financial Corporation
- Credit Suisse Holdings (USA), Inc.
- Deutsche Bank AG
- First Horizon National Corporation
- General Electric Company
- Goldman Sachs & Co.
- HSBC North America Holdings, Inc.
- JPMorgan Chase & Co.
- Merrill Lynch & Co. / First Franklin Financial Corp.
- Morgan Stanley
- Nomura Holding America Inc.
- The Royal Bank of Scotland Group PLC
- Société Générale