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US-based banks face mortgage lawsuits
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The largest banks operating in the US have been told to expect lawsuits from
a federal regulator in the next few days, accusing them of breaching
commitments on the quality of mortgage securities sold to Fannie Mae and
Freddie Mac, the government-sponsored mortgage guarantors, according to
people familiar with the situation.
The move, from the Federal Housing Finance Agency, a regulatory agency set
up to oversee Fannie and Freddie, would be a dramatic escalation of the
mortgage litigation mess that is hampering banks’ attempts to recover from
the financial crisis.
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It would be another blow for Bank of America, the largest US bank by assets,
which has seen its share price battered by doubts over its reserves for
mortgage-related losses, putbacks and litigation.
Bank of America could potentially face the biggest claim, according to data
compiled by the news and data company Inside Mortgage Finance, whose
research is regularly cited by the US government.
Countrywide Financial, the mortgage firm BofA purchased in 2008 at the
urging of federal officials, and BofA together likely sold Fannie and
Freddie more than $189bn in bonds from 2003 to 2008 backed by mortgages not
guaranteed by the now government-controlled home loan giants, according to
Inside Mortgage Finance.
In all, the mortgage giants purchased nearly $883bn of these securities,
according to Inside Mortgage Finance data. The exact extent of Fannie’s and
Freddie’s losses on these bonds is unclear.
Other US banks including JPMorgan Chase and large overseas groups such as
Deutsche Bank are also expected to be dragged into the litigation, which was
first reported by the New York Times.
The FHFA is looking to recover billions of dollars in losses incurred by
Fannie and Freddie, which bought mortgage securities from banks in the run-
up to the financial crisis that soured as homeowners began to miss payments
and default on the loans.
UBS, the Swiss bank, was sued by the FHFA in July over similar allegations.
Other large banks had received subpoenas related to the regulators’
enquires and more lawsuits had been expected.
In the UBS case, the FHFA accused the bank of having “falsely represented
that the underlying mortgage loans complied with certain underwriting
guidelines and standards, including representations that significantly
overstated borrowers’ capacity to repay their mortgage loans”.
The latest legal move has been prompted by regulators’ concern that the
statute of limitations to bring charges was running out, two people familiar
with the matter said. It will be celebrated by those who believe that banks
have gone unpunished for their part in manufacturing the so-called toxic
assets that clogged the financial system during the crisis.
Quinn Emanuel Urquhart & Sullivan, which claims “we do it aggressively -
like no other law firm”, is acting for the regulator.
But it is a deeply controversial move within the Obama administration, which
is looking to ensure that the economy avoids a double-dip recession and
that the banking system remains on an even keel. The US Treasury and the
FHFA have not always seen eye to eye on financial policy since the crisis.
Industry figures were scathing on the move on Thursday night. “You have a
very activist law firm that’s skilled in this dramatic flashy stuff,” said
one. “The idea that Fannie and Freddie are victims doesn’t stand up on
its face. They were involved in creating these securities.”
Fannie Mae, Freddie Mac and FHFA had signed agreements with the biggest
mortgage bond issuers preserving their right to sue the firms for alleged
fraud even if the respective statutes of limitations ran out, two people
familiar with the matter said.
The documents, known as tolling agreements, were agreed to by the banks to
enable them and FHFA to settle their disputes without the regulator being
under significant time pressures.
But the September 2008 law that made Fannie and Freddie wards of the state
put time limits on their regulator to bring action for alleged past abuses.
One of those was for three years from the date of the law’s enactment.
The agency launched its suit against UBS in July after settlement talks with
the bank broke down, these people said, and UBS refused to allow FHFA more
time to build its case. In its complaint against the Swiss lender, FHFA
referenced its 2009 tolling agreement with the company.
【在 C*****r 的大作中提到】
: U.S. Is Set to Sue a Dozen Big Banks Over Mortgages
: link: http://www.nytimes.com/2011/09/02/business/us-is-set-to-sue-dozen-big-banks-over-mortgages.html
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