US banks to be sued over mortgage bonds

A dozen big banks in the US are set to be sued for allegedly misrepresenting the quality of mortgage securities sold at the height of the housing boom.

According to the New York Times, the federal agency that oversees Fannie Mae and Freddie Mac is expected to file suits against the Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank and others in the coming days.

In the suits, the Federal Housing Finance Agency will argue that the banks did not perform due diligence when assembling and marketing the mortgage securities, and failed to identify that borrowers’ incomes were inflated or falsified.

The New York Times says that individuals with knowledge of the case say it will be similar in scope to a suit filed against UBS in July by the same agency, which seeks to recover at least $900m.

The Bank of America, Goldman Sachs and JPMorgan all declined to comment, while a spokesman for Deutsche Bank told the New York Times: “We can’t comment on a suit that we haven’t seen and hasn’t been filed yet.”