The ripple effects of the financial crisis continue to take their toll on banks, as reckless lending during the bonanza years catches up to them. Friday after the closing bell, and ahead of a Labor Day weekend, the Federal Housing Finance Agency confirmed it was suing 17 different financial institutions for misrepresenting the quality of mortgage backed securities sold to Fannie Mae and Freddie Mac.
Affecting major banks like Bank of America, JPMorgan Chase, Goldman Sachs and Citigroup, the suit alleges negligent misrepresentation, securities laws violations, and common fraud as they issued, bundled, and sold MBS to government sponsored enterprises. (See list of institutions, amounts, and the suit against BoA below).
The FHFA is not looking for repurchases, but rather is looking to retrieve losses on Fannie and Freddie’s loan portfolios. JPMorgan is being sued over $33 billion in securities, while Bank of America-Merrill Lynch is on the hook for almost $25 billion, and the Vampire Squid, Goldman Sachs, is in for $11.1 billion.
According to the suit, “defendants falsely represented that the underlying mortgage loans complied with certain underwriting guidelines and standards, including representations that significantly overstated the ability of the borrowers to repay their mortgage loans.”
Below is a list of major institutions along with the value over which they are being sued for.
1. Ally Financial Inc. f/k/a GMAC, LLC ($6 billion)
2. Bank of America Corporation ($5 billion)
3. Barclays Bank PLC ($4.9 billion)
4. Citigroup, Inc ($3.5 billion)
5. Countrywide Financial Corporation ($26.6 billion, Countrywide was bought by Bank of America)
6. Credit Suisse Holdings (USA), Inc
7. Deutsche Bank AG ($14.2 billion)
8. First Horizon National Corporation ($883 million)
9. General Electric Company ($549 million)
10. Goldman Sachs & Co. ($11.1 billion)
11. HSBC North America Holdings, Inc. ($6.2 billion)
12. JPMorgan Chase & Co. ($33 billion)
13. Merrill Lynch & Co. / First Franklin Financial Corp. ($24.8 billion)
14. Morgan Stanley
15. Nomura Holding America Inc. ($2 billion)