Foreclosure rates in the greater Miami area remain astonishingly high, but they’re headed in the right direction. In March, 13....
A debate is stirring in Michigan over legislation that aims to shorten the redemption period for homeowners in foreclosure, The...
The Federal Deposit Insurance Corp. sued 12 major banks Friday for selling allegedly faulty mortgage bonds to defunct Colonial Bank.
Montgomery, Ala.-based Colonial failed in August 2009 with more than $25 billion in assets after bad bets on housing and a lending scandal tied to now shuttered Taylor Bean & Whitaker. At the time, the FDIC estimated the failure would cost the insurance fund $2.8 billion.
The banks that sold the $388 million in allegedly problematic mortgage-backed securities to Colonial include:
JPMorgan Chase; Citigroup; Wells Fargo; Merrill Lynch; Deutsche Bank; Credit Suisse; UBS; HSBC; FTN Financial; Royal Bank of Scotland; Ally Financial; and First Horizon.
"When they issued or underwrote these certificates, the defendants made numerous statements of material fact about the certificates and, in particular, about the credit quality of the mortgage loans that backed them," the FDIC said in its suit filed in the U.S. District Court for the Southern District of New York. "Many of those statements were untrue."
The banks declined to comment.
The FDIC sampled several deals sold to Colonial and found "material or misleading" statements about loan-to-value ratios, appraisals or owner-occupancy status on more than half the loans backing the deals. In some bonds, more than two-thirds of the loans were allegedly misleading or fraudulent, according to the suit.
The allegations mirror a previous suit from the Federal Housing Finance Agency, which sued 17 banks over mortgage bonds sold to Fannie Mae and Freddie Mac during the housing bubble. Those suits remain tied up in court.
Don’t miss out: get HW delivered via email