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U.S. Government Sues 17 Financial Firms for Role in Toxic Securities

In a business lawsuit of epic proportions, the U.S. Federal Housing Finance Agency (FHFA) is suing 17 financial firms, including the world’s biggest banks, for selling Fannie Mae and Freddie Mac billions of dollars in mortgage-backed securities that became toxic when the housing market collapsed.

The FHFA supervises Fannie and Freddie and according the lawsuit, the two groups purchased a total of $196 billion in mortgage-backed securities from the named merchants. So far the government has not stated a total amount it’s seeking in damages but said it’s requesting the cancellation of the toxic sales, as well as compensation for interest payments, destroyed principal and attorney fees.

According to the suit, the FHFA claims the securities were sold to Fannie and Freddie based on deeds 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.”

A few of the American banks listed in the claim are Citigroup, Bank of America (BOA), Goldman Sachs, and JP Morgan Chase, while targeted big European institutions include Barclays Bank, The Royal Bank of Scotland, and Credit Suisse. The suit is particularly destructive to BOA, which acquired Countrywide Financial Corp. in 2008 and Merrill Lynch in 2009; each are being sued separately for sales totaling $57.5 billion.

The actions of both the big banks and the U.S. government during the collapse of the housing market continue to affect consumers and businesses on many levels. If you’re grappling with a real estate related issue, contact Los Angeles real estate litigation lawyer Art Matthews at Matthews Law Firm, Inc. Call 800-449-4850 for a complimentary case review today.

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