JPMorgan Chase & Co. and Ally Bank are among financial institution blamed in lawsuits over misrepresented mortgage bonds. German lender HSH Nordbank AG is suing the banks involved in hopes of recouping $293 million in losses.
JP Morgan Chase and Ally Bank Accused of Foul Play
According to the lawsuits filed by HSH Nordbank in New York State Supreme Court on Wednesday, JPMorgan Chase–the nation’s largest bank by assets–and Ally Bank (among others) presented the German lender with documents for securities that contained “material misrepresentations and omissions” about the mortgage bonds backing them up.
HSH Nordbank also named Barclays Capital Inc. and Credit Suisse Securities (USA) in its three separate cases that state wrongdoing by the banks “led directly” to losses on the securities.
The German lender said in addition to presenting false documents regarding mortgage bonds, the banks’ offering materials contained misrepresentations about the legal validity of assignments of loans to mortgage-securitization trusts and the rights of the trusts to receive interest and principal payments on the loans.
Losses on the payments impacted the bank since they are used to pay investors.
FHFA to Sue Big Banks over Mortgage Bonds
Misrepresentations of mortgage bonds securities were largely attributed to the downfall of major entities like Lehman Brothers and AIG and were said to help push the U.S. economy into the financial crisis in 2008.
It’s for this reason that, in September, the Federal Housing Finance Agency (FHFA) announced its own plan to sue big banks over mortgage bond losses. Fannie Mae and Freddie Mac, which are both regulated by the FHFA, have also recouped around $18 billion from banks responsible for mortgage bond losses since the beginning of 2010.
In all, HSH Nordbank hopes to recoup $293 million of its own losses. According to court papers, the three cases are asking for $130 million, $117 million and $46 million lost, respectively.
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