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Federal agency to sue 12 big banks

A dozen big banks are to be sued by the federal agency that controls mortgage businesses Fannie May and Freddie Mac.

The Federal Housing Finance Agency - which was created in 2008 following the Housing and Economic Recovery Act - will file the suits against the 12 lenders after accusing them of being misleading with regard to the quality of the mortgage securities they developed and sold, the New York Times reports.

Billions of dollars in compensation is being sought in the case, which centres on banks including JPMorgan Chase, Goldman Sachs, Bank of America and Deutsche Bank.

Spokesman for Deutsche Bank Frank Kelly said: "We can't comment on a suit that we haven't seen and hasn't been filed yet," while the other institutes all declined to speak on the matter.

It is to be argued that the banks did not perform the required due diligence outlined in securities law and failed to spot evidence suggesting the incomes of borrowers might be incorrect.

By Asim Shah