The Federal Housing Finance Agency (FHFA) has filed lawsuits against 17 financial institutions, including 132 individuals over violations of federal securities laws related to the sale of residential private-label mortgage-backed securities.

 

The civil lawsuits allege that the securities sold contained materially false or misleading statements and omissions.  According to the filing, "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."

The complaints seek damages and civil penalties under the Securities Act of 1933, along with state securities law violations and common law fraud.  In addition, the complaints ask for compensatory damages for negligent misrepresentation.

The FHFA filed the lawsuits on behalf of Fannie Mae and Freddie Mac, the government-sponsored entities (GSEs) that the agency is the conservator over.  The agency suggests that some portion of losses incurred by the GSEs was the direct result of the failure of the defendants to properly disclose the risky characteristics of the securities sold to the GSEs.

The defendants in the filings include the organizations and executives of the following financial institutions:

Ally Financial Inc. (formerly known as GMAC)
Bank of America Corporation
Barclays Bank PLC
Citigroup
Countrywide Financial Corporation
Credit Suisse Holdings (USA) Inc.
Deutsche Bank AG
First Horizon National Corporation
General Electric Company
Goldman Sachs
HSBC North America Holdings Inc.
JPMorgan Chase
Merrill Lynch & Company/First Franklin Financial Corporation
Morgan Stanley
Nomura Holding America Inc.
The Royal Bank of Scotland Group PLC
Société Générale