US to File Suit Against Big Banks Regarding Mortgage Lending
It doesn’t seem possible that not so very many years back, mortgages were fairly easy to get and they were bought and sold by lender and secondary market . . . yet life in mortgage lending sure has changed. It seems almost impossible to keep track of which giant is filing suit again which other giant just now. There are the existing and unsettled suits, then there are the soon to be filed suits, and as if that’s not enough we have a race to beat a statute of limitations related the US agency working to file suit against what we are told is a dozen or so of the really big banks.
It seems the condensation of why this is happening can be summed up as “you should have known better” but at this writing it’s a challenge to know which side truly should have “known better” than the other.
So, the Federal agency which oversees Fannie Mae and Freddy Mac is preparing to file suit against what we hear are likely over a dozen BIG BANKS. Why? They claim the big banks misrepresented the quality of the mortgage securities that they sold at the height of the housing boom and they want to be compensated for billions of dollars. They are in a hurry to get this suit filed, too. Why? The statute of limitations is 3 years that means unless they file before Wednesday, the date the statute runs out, it could be far more difficult to make these claims.
In looking at this impending litigation let’s look at the timeline. It is almost exactly three years since fall of Lehmann Brothers and the beginning of a financial crisis that has proven to be huge and long lasting. It is likely to have been caused, in a large degree, by subprime lending. The legal fallout goes on and is mounting.
The soon to be filed suits stem from subpoenas filed a year ago by the agency to the big banks in question. The securities law requires “due diligence” and the suits will agrue that in selling these securities to the investors, the big banks failed to show due diligence and thus the result has been and continues to be securities which lost value, borrowers unable to pay their mortgages, income figures at point of application which were at inflated and falsified.Continued on the next page