US housing agency to sue banks

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US housing agency to sue banks

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The US federal agency that oversees mortgage lending is set to sue more than a dozen big banks for allegedly misrepresenting the products they sold during the housing bubble, according to the New York Times.

It says the Federal Housing Finance Agency claims the banks failed to perform due diligence and missed evidence that borrowers’ incomes were falsified or inflated. The banks had pooled the mortgages and sold them as securities.

Mortgage giants Fannie Mae and Freddie Mac, which had to be bailed out by the government, lost more than 21 billion euros, due partly to their purchases of mortgage-backed securities, when the housing market collapsed in late 2008.

The practice of subprime lending, in which brokers lowered their standards to entice homebuyers to take out large mortgages for properties they could not afford, was a root cause of the crisis.

The banks being targeted include Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank.

The lawsuits stem from subpoenas the finance agency issued to banks last year. They could be filed as early as Friday, the NY Times said, but if not filed Friday, it added, the suits would come on Tuesday.