The following article is very depressing. On the one hand, it shows that the U.S. Government is finally recognizing that there IS a mortgage crisis in which the government has a role to play. We will have to watch this carefully, but from the spin in this Reuters article, I suspect the real purpose of the Government is to cover up the real constitutional and legal corruption implicit in the mortgage foreclosure crisis. We will have to watch for the complaints as the Government files them and make the real judgment then, but this is apparently more about INVESTORS’ protection than homeowners’ protection, never mind redemption or stopping the land grab going on all over the country:
WASHINGTON (Reuters) –The agency that oversees mortgage markets is preparing to file suit against more than a dozen big banks, accusing them of misrepresenting the quality of mortgages they packaged and sold during the housing bubble, The New York Times reported on Thursday.
The Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, is expected to file suit against Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among other banks, the Times reported, citing three unidentified individuals briefed on the matter.
The suits stem from subpoenas the finance agency issued to banks last year. They could be filed as early as Friday, the Times said, but if not filed Friday it said the suits would come on Tuesday.
The government will argue the banks, which pooled the mortgages and sold them as securities to investors, failed to perform due diligence required under securities law and missed evidence that borrowers’ incomes were falsified or inflated, the Times reported.
Fannie Mae and Freddie Mac lost more than $30 billion, due partly to their purchases of mortgage-backed securities, when the housing bubble burst in late 2008. Those losses were covered mostly with taxpayers’ money.
The agency filed suit against UBS in July, seeking to recover at least $900 million for taxpayers, and the individuals told the Times the new suits would be similar in scope.
A spokesman for the Federal Housing Finance Agency was not immediately available for comment.
The Times said Bank of America, JP Morgan and Goldman Sachs all declined comment. A Deutsche Bank spokesman told the Times, “We can’t comment on a suit that we haven’t seen and hasn’t been filed yet.”
The practice of subprime lending, wherein mortgage brokers lowered their standards to entice homebuyers to take out large mortgages to buy more expensive homes than they could afford, was a root cause of the mortgage market implosion.
News of the suit could have a negative impact on stocks of the banks in question on Friday. JPMorgan Chase, Bank of America and Goldman Sachs are traded on the New York Stock Exchange, while Deutsche Bank is traded on the German exchange.
S&P 500 stocks index futures were trading down 0.6 percent in Asia. U.S. Treasury futures also ticked higher..
The Times report said investors fear that if banks are forced to pay out billions for mortgages that defaulted, the suit could sap earnings for years and contribute to further losses across the financial services industry.