New York Attorney General Eric Schneiderman filed a lawsuit against Credit Suisse (CS) for allegedly deceiving investors about the quality of residential mortgage-backed securities. This is the second case filed as part of a joint effort with the federal government.
As a result of the deception, investors lost about $11.2 billion. Fannie Mae and Freddie Mac were among the list of investors who lost money, according to a statement.
“This lawsuit against Credit Suisse marks another significant step in our efforts to hold financial institutions accountable for the misconduct that led to the worst financial crisis in nearly a century,” Schneiderman said in a statement.
The complaint reports that investors believed loans in the RMBS were evaluated and monitored, ensuring quality of the investment. However, due diligence did not occur. The main priority was receiving high volumes of loans from mortgage originators, which were rewarded by Credit Suisse based on loan volume.
This lawsuit is similar to the JP Morgan Chase (JPM) complaint over MBS, involving Bear Stearns.
The suits are a result of the Residential Mortgage-Backed Securities Working Group, which is a task force that was established by President Barack Obama earlier this year.
