US banks offered deal over improper mortgage practices, report says

7 September 2011

US banks have been offered a deal to settle allegations of improper practices surrounding mortgages, a news report has revealed.

According to the Financial Times (FT), which quoted unnamed sources familiar with the matter, the financial institutions involved in the case have been offered a deal where their legal liability will be limited in exchange for a multi-billion dollar payment.

Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial are the firms involved in the dispute.

If the agreement is reached, then it will release the firms from legal liability for the supposed wrongful securitisation practices, the newspaper reported.

The institutions are among 17 sued by the Federal Housing Finance Agency (FHFA) last week, which alleged that they knowingly mis-sold nearly $200 billion worth of mortgage-backed securities, which went on to drop in value.

In a statement, the FHFA said the “losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities (PLS) are attributable to misrepresentations and other improper actions by the firms and individuals named in these filings”.

The organisation did not state how much in damages it was seeking from the financial institutions.

By Jim Ottewill

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