U.S. Said to Prepare Mortgage Lawsuit Against BofA, JPMorgan

Discussion in 'Law and Justice System' started by hvactec, Oct 11, 2011.

  1. hvactec
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    hvactec VIP Member

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    (Updates with Bank of America memo to employees, Barofsky's opposition to forbearance, starting in 13th paragraph.)

    Sept. 2 (Bloomberg) -- Bank of America Corp. and JPMorgan Chase & Co. are among lenders that may face a lawsuit by the U.S. Federal Housing Finance Agency over faulty mortgage loans, according to six people with knowledge of the matter.

    The agency representing Fannie Mae and Freddie Mac is likely to act before next week's deadline for legal claims, according to the people, who weren't authorized to speak publicly. The amount may dwarf the $20 billion sought from the biggest mortgage servicers in a separate probe of lending and foreclosures by 50 state attorneys general, one person said.

    Bank of America led declines in shares of U.S. lenders after the suit was reported in the New York Times earlier today. The FHFA has been demanding refunds from banks for loans sold to Fannie Mae and Freddie Mac that were based on false or missing information about borrowers and properties. The two government- backed mortgage finance firms had to be rescued by taxpayers as defaults on home loans soared toward record levels.

    A lawsuit “is an uncertainty that can go on for years -- that gets the market quite nervous,” said Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., which manages almost $100 billion. “Bank of America, being at the epicenter of these problems, is going to get smashed.”

    Bank of America, based in Charlotte, North Carolina and the largest U.S. lender by assets, fell 66 cents, or 8.3 percent, to $7.25 at 3:27 p.m. in New York Stock Exchange composite trading. JPMorgan and Citigroup Inc., both based in New York, slipped more than 4.5 percent, while San Francisco-based Wells Fargo & Co., the biggest U.S. home lender, declined 4.4 percent.

    Pressure on Shares

    “Any bad news such as new lawsuits is inevitably going to put the stock under pressure,” said Richard Staite, an analyst at Atlantic Equities in London, referring to Bank of America. “There is a question hanging over the company as to whether it needs to raise new equity. If the lawsuit was to result in significant new losses, then it becomes more likely that the company might need to raise equity, which would be a difficult thing to do in the current market.”

    Bank of America, JPMorgan, Goldman Sachs Group Inc. and Deutsche Bank AG are among firms that may be sued by the agency for misrepresenting the quality of mortgage securities sold at the height of the housing bubble, the Times said. Morgan Stanley is likely to be included in the lawsuit, according to one of the people.

    Mortgage Overhang

    A separate report in the Wall Street Journal said Bank of America was told by the Federal Reserve to explain what steps it would take if its financial condition worsens. Chief Executive Officer Brian T. Moynihan has committed more than $30 billion to quelling claims for faulty mortgages since he took the top job in 2010.

    “It doesn't surprise me when we wake up and there's somebody else trying to sue them,” said Marty Mosby, a Nashville, Tennessee-based analyst with Guggenheim Securities LLC. “The overhang and the pressure related to this residential real estate isn't going away any time soon.”

    read more U.S. Said to Prepare Mortgage Lawsuit Against BofA, JPMorgan - BusinessWeek
     
  2. waltky
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    waltky Wise ol' monkey Supporting Member

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    US Sues Bank Of America...
    :clap2:
    U.S. sues Bank of America for more than $1 billion for mortgage fraud
    10/24/2012 — The top federal prosecutor in Manhattan sued Bank of America for more than $1 billion on Wednesday for mortgage fraud against Fannie Mae and Freddie Mac during the years around the financial crisis.
     
  3. waltky
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    waltky Wise ol' monkey Supporting Member

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    Banks slow to pay out mortgage relief funds...
    :eusa_eh:
    Behind the mortgage settlements from the housing crisis
    May 19,`13 - Banks have paid less than half the $5.7 billion in cash owed to troubled homeowners under nearly 30 settlements brokered by the government since 2008, delaying help to the millions of victims of discrimination and shoddy lending that epitomized the housing crisis, according to a Washington Post analysis of government data.
     

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