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US banks to be sued by mortgage giants Fannie Mae & Freddie Mac
Banks in America are in trouble again as they are sued by mortgage company Fannie Mae and Freddie Mac. This spells trouble for everyone.

MORE THAN a dozen banks in the US are going to be sued by the federal body that oversees the mortgage giants Fannie Mae and Freddie Mac for the misrepresentation of the quality of the mortgage securities that these banks assembled and sold at the height of the housing bubble. The banks against whom the suits would be filed is about to be in grave trouble.

These Federal Housing Finance Agencies would file the suits in the coming years in the federal courts, and the banks to face the suits are the Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others. Previous to the suits subpoenas had been issued to these banks a year ago. The suits must be filed till Tuesday.

These banks would be facing a number of charges of marketing the assembled mortgages as securities to investors. Apart from this, they have failed to see that there were customers whose incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value. These led to Fannie and Freddie losing a total of $30 billion that were paid by the taxpayers.

The investors in the bank shares are sacred as this federal suing is a new thing and initially the mortgage giants were forcing the the big banks to buy back tens of billions in soured mortgage-backed bonds. In the suing case instead of demanding the banks to buy back their back the original loans, the finance agency is seeking reimbursement for losses on the securities held by Fannie and Freddie.

Apart of angry investors 50 state attorneys are also negotiating a settlement to address abuses by the largest mortgage servicers, including Bank of America, JPMorgan and Citigroup. These attorneys and the federal officials wants the bank to pay at least $20 billion.

Bank of America is in deep trouble as last month they were again involved in a controversy whereby American International Group filed a $10 billion suit against them. They were accusing the bank of misrepresenting the quality of mortgages that backed the securities A.I.G. bought.Declining the comment Bank of America said, “We can’t comment on a suit that we haven’t seen and hasn’t been filed yet.”

However, it was heard that these financial banking system said that losses on the mortgage-backed securities happened because of the recession in the economy and not because how the mortgage was handled. They also said that since the federal bodies like Fannie and Freddie and AIG knew that these securities are never risk free rthen the banks cannot be blamed. Investors fear that if the banks are forced to pay up billions then it may return to its previous financial crisis and lose whatever small progress it has made.
 

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of merinews.com. In case you have a opposing view, please click here to share the same in the comments section.
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