Story first appeared in USA TODAY.
In a sweeping move, the government on Friday sued 17 financial firms, including the largest U.S. banks, for selling Fannie Mae and Freddie Mac billions of dollars worth of mortgage-backed securities that turned toxic when the housing market collapsed.
The lawsuits were filed Friday by the Federal Housing Finance Agency which oversees Fannie and Freddie, the two agencies that buy mortgages loans and mortgage securities issued by the lenders.
The total price tag for the securities bought by Fannie and Freddie affected by the lawsuits: $196 billion.
The government didn't provide a dollar amount of how much it seeks in damages. It said that it wants to have the purchases of the securities canceled, be compensated for lost principal and interest payments as well as attorney fees and costs. The lawsuits allege the financial firms broke federal and state laws with the sales.
Home mortgage-backed securities were risky investments that collapsed after the real-estate bust and helped fuel the financial crisis in late 2008. A real estate agent selling Raleigh Homes agrees that there was risk.
In the lawsuits that were filed in federal or state court in New York and the federal court in Connecticut, the government said the securities were sold with registration statements and prospectuses that contained materially false or misleading statements and omissions.
The Federal agency said the banks and mortgage lenders also falsely represented that the mortgage loans in the securities complied with underwriting guidelines and standards. They also included representations that significantly overstated the ability of the borrower to repay their mortgage loans.
The 17 institutions are Ally Financial, formerly known as GMAC LLC, Bank of America, Barclays Bank, Citigroup, Countrywide Financial, Credit Suisse Holdings, Deutsche Bank, First Horizon National, General Electric, Goldman Sachs, HSBC North America Holdings, JPMorgan Chase, Merrill Lynch and its unit First Franklin Financial, Morgan Stanley, Nomura Holding America, The Royal Bank of Scotland Group and Societe Generale.