Feds Sue 17 Financial Institutions To Recover Losses To Fannie Mae And Freddie Mac

The Federal Housing Finance Agency (“FHFA”), as conservator for Fannie Mae and Freddie Mac, today 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 (“PLS”) to Fannie and Freddie. 

Complaints have been filed against the following lead defendants, in alphabetical order:
 
1. Ally Financial Inc. f/k/a GMAC, LLC
 
2. Bank of America Corporation
 
3. Barclays Bank PLC
 
4. Citigroup, Inc.
 
5. Countrywide Financial Corporation
 
6. Credit Suisse Holdings (USA), Inc.
 
7. Deutsche Bank AG
 
8. First Horizon National Corporation
 
9. General Electric Company
 
10. Goldman Sachs & Co.
 
11. HSBC North America Holdings, Inc.
 
12. JPMorgan Chase & Co.
 
13. Merrill Lynch & Co. / First Franklin Financial Corp.
 
14. Morgan Stanley
 
15. Nomura Holding America Inc.
 
16. The Royal Bank of Scotland Group PLC
 
17. 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. on July 27, 2011. 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 today reflect FHFA’s conclusion that some portion of the losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities ("PLS") 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 Fannie and Freddie for those securities.
 
FHFA filed the complaints under the broad authority granted to it by the Housing and Economic Recovery Act of 2008. According to the FHFA, discussions regarding these matters have taken place with several of the firms receiving complaints and, where constructive, they will continue.