Virginia Sues 13 Banks for $1.15Billion over alleged Mortgage Bond Fraud

Citigroup, Bank of America, Goldman Sachs Group, Barclays, HSBC and Royal Bank of Scotland are among 13 banks whose units were sued for $1.15bn by Virginia over sale of residential mortgage-backed securities during the financial crisis.

Virginia attorney general, Mark Herring, made the denunciations, which identify with the sale of securities to the state’s retirement fund from the year of 2004 to 2010.

He alleged that the 13 banks bundled up risky home loans into the securities or bonds, which thus were sold to the Virginia Retirement System as, to a great extent as brilliant AAA-appraised bonds. The retirement fund has 600,000 members including educators, workers from the city and county governments, state troopers, and court representatives.

“The message today is clear. It doesn’t matter if you’re a small-time con artist or a multibillion-dollar Wall Street bank. If you try to rip off or defraud Virginia consumers or Virginia taxpayers, you will be caught and you will be held responsible,” said Herring, who is bringing the claim after enough evidence was accumulated by a whistleblowing analytical firm, IntegraREC.

A week ago HSBC settled charges over false representations in offering mortgage bonds to the government backed US mortgage companies Fannie Mae and Freddie Mac. HSBC paid $550m to the US’s Federal Housing Finance Agency, which has recorded 18 claims.

Virginia alleges the banks deceitfully distorted the nature of the mortgages they bundled up and sold to investors, such as the Virginia Retirement System. As indicated by the charges, 40% of the mortgages sold on to the retirement trust had a higher danger of default than was shown at the time they were purchased, prompting $383m of losses.

The law permits claims for the assessed losses and the 317-page claim additionally names financial institutions including Citigroup, Countrywide, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley, UBS and Washington Mutual.

“Every Virginian was harmed by the financial crisis. Homes were lost, retirement accounts were devastated, small businesses saw their credit dry up almost overnight, and state and federal budget cuts hurt vulnerable Virginians,” said Herring.

The claim sets out three ways in which the banks mispresented the classification of the home loans being sold: the estimation of the loan contrasted with the estimation of the home, the owner occupancy rate and rate of homes with a second mortgage.

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Christy Gren
Christy Gren is an Industry Specialist Reporter at Industry Leaders Magazine she enjoys writing about Unicorns, Silicon Valley, Startups, Business Leaders and Innovators. Her articles provide an insight about the Power Players in the field of Technology, Auto, Manufacturing, and F&B.

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