In July, the agency filed suit against UBS, another major mortgage securitizer, seeking to (recover) at least $900 million, and the individuals with knowledge of the case said the new (litigation) would be similar in scope.
Private holders of mortgage securities are already trying to force the big banks to buy back tens of billions in soured mortgage-backed bonds, but this federal effort is a new (chapter) in a huge legal fight that has alarmed investors in bank shares. In this case, rather than demanding that the banks buy back the original loans, the finance agency is seeking (reimbursement) for losses on the securities held by Fannie and Freddie.
The impending litigation underscores how almost exactly three years after the collapse of Lehman Brothers and the beginning of a financial crisis caused in large part by (subprime) lending, the legal fallout is mounting.
Besides the angry investors, 50 state attorneys general are in the final stages of negotiating a settlement to address abuses by the largest mortgage servicers, including Bank of America, JPMorgan and Citigroup. The attorneys general, as well as federal officials, are pressing the banks to pay at least $20 billion in that case, with much of the money earmarked to reduce mortgages of homeowners facing foreclosure.
And last month, the insurance giant American International Group filed a $10 billion suit against Bank of America, accusing the bank and its Countrywide Financial and Merrill Lynch units of misrepresenting the quality of mortgages that (backed) the securities A.I.G. bought.
