The U.S. government has sued several of the country’s largest banks over mortgage-backed securities they sold that lost value in the housing market collapse.
The Federal Housing Finance Agency, which oversees mortgage buyers Fannie Mae and Freddie Mac, filed the lawsuit Friday seeking seeks compensation for more than $41 billion of losses related to subprime mortgage bonds. The suit could hamper a broader government mortgage settlement with banks, Reuters reports.
Bank of America Corp, its Merrill Lynch unit, Barclays , Citigroup and Nomura are among the banks named in the suit, Reuters reports.
The government says the banks misrepresented the quality of the mortgage securities — securities that were backed by subprime and other risky loans but were deemed safe investments by ratings agencies.
The lawsuits come as a result of past claims from the FHFA. Last year, the FHFA issued 64 subpoenas to various entities seeking documents related to mortgage-backed securities in which the Fannie and Freddie had invested.
The agency said at the time the documents would enable it to determine whether the banks and other financial entities were liable for losses they had suffered from their investments. FHFA said it expected to recoup funds, which would be used to offset payments made by the U.S. Treasury to Fannie and Freddie.
Fannie Mae and Freddie Mac are viewed as critical to the mortgage market, because they buy mortgages loans and mortgage securities issued by the lenders.