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US to sue over a dozen banks over mortgages: report

The lawsuit, reported in the New York Times, relates to alleged misrepresentation of the quality of mortgages during the boom.

Image: Ted S. Warren/AP/Press Association Images

THE UNITED STATES is reportedly set to sue over a dozen banks accusing them of misrepresenting the quality of mortgages they sold during the housing boom.

Nelson D. Schwartz writes in the New York Times that the Federal Housing Finance Agency, which oversees the mortgage giants Frannie Mae and Freddie Mac, is expected to file lawsuits against Bank of America, JP Morgan Chase, Goldman Sachs and Deutsche Bank as early as today over their alleged failure to perform due diligence and examine evidence of borrowers’ income being inflated or false.

Fannie Mae and Freddie Mac lost more than $30 billion because of bad mortgage-backed securities and had to be bailed out by the US government. The suit is on foot of subpoenas the agency issued to the banks in question last year, the paper reports.

BBC News reports that this is the latest in a number of lawsuits being filed against financial institutions who were involved in issuing mortgage-backed securities which lawyers for the government will argue the banks should have known were not sound. Executives argue the losses were because of the global economic downturn.

For more information read the full story on the New York Times>

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Hugh O'Connell

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