The Federal Housing Finance Agency (FHFA), as conservator to the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, has filed lawsuits against 17 financial institutions, certain of their officers and various unaffiliated lead underwriters. The suits allege violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities (MBS) to the GSEs.
Complaints have been filed against the following lead defendants:
►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
These complaints were filed in federal or state court in New York or the federal court in Connecticut. The complaints seek damages and civil penalties under the Securities Act of 1933, similar in content to the complaint FHFA filed against UBS Americas Inc. in late July. In addition, each complaint seeks compensatory damages for negligent misrepresentation. Certain complaints also allege state securities law violations or common law fraud.
As conservator of Fannie Mae and Freddie Mac, FHFA is charged with preserving and conserving these companies’ assets and does so on behalf of taxpayers. The complaints filed reflect FHFA’s conclusion that some portion of the losses that Fannie Mae and Freddie Mac incurred on private-label MBS are attributable to misrepresentations and other improper actions by the firms and individuals named in these filings.
The FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the GSEs for those securities.
FHFA filed the complaints under the broad authority granted to it by the Housing and Economic Recovery Act of 2008 (HERA). The U.S. legal system provides for addressing such alleged misrepresentations through the nation’s securities laws and traditional common law. FHFA is following those legal remedies in filing these complaints and seeks to recover on losses to the GSEs that are the legal responsibilities of others.
