The Federal Housing Finance Agency (FHFA), acting as conservator for Fannie Mae and Freddie Mac, has filed securities lawsuits against a total of 17 financial entities in both federal and state courts. States in which the lawsuits were filed are New York and Connecticut. Financial institutions affected by the lawsuits, which were filed in September 2011, include Bank of America, Credit Suisse, Citigroup, Countrywide, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley and Deutsche Bank. These institutions, along with 8 others, violated federal securities and common laws when selling mortgage-backed securities. This is not the first time many of these financial institutions have been charged with securities fraud, and investment attorneys are doubtful that it will be the last.
The FHFA is seeking civil penalties as well as damages. Allegedly, the financial institutions violated fiduciary duty by providing misleading loan descriptions as a part of their sales and marketing materials. The marketing materials did not reveal the true risk factors associated with the loans. According to the FHFA’s press release, “Based on our review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the Enterprises for those securities.”
Congress and regulators have put forth a continuing effort to deal with the practices of institutions that led to the financial crisis of 2008 and this lawsuit is part of that goal. It is similar to the one filed on July 27, 2011 against UBS Americas Inc. The Housing and Economic Recovery Act of 2008 gives the FHFA the authority to file complaints such as this one.
As conservator of Freddie Mac and Fannie Mae, the FHFA is responsible for preserving the assets of these companies, but if — as an individual investor — you have suffered investment losses that you believe to be the result of misleading marketing materials or a breach of fiduciary duty, find out more about your legal rights and options by contacting an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.