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17 firms sued by U.S. over mortgage-backed securities

03 September 2011 02:59 (UTC +04:00)

Baku-APA. The Federal Housing Finance Agency (FHFA) of the United States on Friday filed lawsuits against 17 financial institutions to recover losses to Fannie Mae and Freddie Mac for mortgage-backed securities, APA reports.

Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., Goldman Sachs, Morgan Stanley, Deutsche Bank AG, Barclays Bank PLC and other large banks are targeted by the lawsuits.

The FHFA, conservator for Fannie Mae and Freddie Mac, alleged that some portion of the losses that the two mortgage giants incurred on private-label mortgage-backed securities (PLS) are attributable to misrepresentations and other improper actions by the firms named in these filings.

The loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to Fannie Mae and Freddie Mac for those securities, the agency noted, adding that it seeks to recover losses to these two firms.

Fannie Mae and Freddie Mac bought 24.8 billion U.S. dollars in securities from Merrill Lynch & Co., 6 billion dollars from Bank of America, and 3.5 billion dollars from Citigroup, according to the FHFA.

The two government-backed mortgage finance companies were under U.S. government conservatorship since 2008 as defaults on residential loans soared toward record level.