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Monday, September 5, 2011

Bank Stocks Drop; FHFA Sues 17 Banks

WASHINGTON - NOVEMBER 23: Federal Housing Fi...Image by Getty Images via @daylifeBank stocks dropped late Friday as The Federal Housing Finance Agency (FHFA) sued 17 US and foreign banks claiming securities were sold to Fannie Mae and Freddie Mac based on documents that "contained misstatements and omissions of material facts concerning the quality of the underlying mortgage loans, the creditworthiness of the borrowers, and the practices used to originate such loans."

Shares of Bank of America fell more than 8.3 percent, JPMorgan Chase dropped 4.6 percent and Goldman fell 4.5 percent.

This FHFA action was preceded by the states attorneys general who sued the banks claiming faulty foreclosure actions. Next private investors jumped on the law suit band wagon claiming the mortgages they had purchased were misrepresented by the banks.

At this writing it is not known what specific damages the FHFA is seeking, only that it wants the sales cancelled and reimbursed for lost principal complete with interest payments and of course legal fees.

The FHFA claims that the securities were sold to Fannie Mae and Freddie Mac based on documents containing misstatements and omissions of material facts. i.e. the quality of the underlying mortgage loans, the creditworthiness of the borrowers, and the practices used to originate such loans.

Following is a list of the Banks named in the suit.

Ally Financial Inc. f/k/a GMAC, LLC
Bank of America Corporation
Barclays Bank PLC
Citigroup, Inc.
Countrywide Financial Corporation
Credit Suisse Holdings (USA), Inc.
Deutsche Bank AG
First Horizon National Corporation
General Electric Company
Goldman Sachs & Co.
HSBC North America Holdings, Inc.
JPMorgan Chase & Co.
Merrill Lynch & Co. / First Franklin Financial Corp.
Morgan Stanley
Nomura Holding America Inc.
The Royal Bank of Scotland Group PLC
Société Générale

The Hoss will have additional comments on this action taken by the FHFA in his next post.
Stay on Track,Money Magazine Hoss

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