FDIC Files MBS Suits On Behalf of Failed Bank

FDIC RMBS

On August 10, the FDIC filed five actions that collectively seek to recover over $740 million from numerous financial institutions based on claims that the institutions violated federal and state securities laws in the offering of certain residential mortgage-backed securities to a now failed bank. As receiver for the failed bank, the FDIC alleges that the institutions omitted key facts and made numerous false statements of material fact about the securities, including about the credit quality of the mortgage loans that backed the securities. The material misstatements and omissions, according to the FDIC, contributed to substantial losses at the failed bank and subsequent costs to the Federal Deposit Insurance Fund. The suits, which were filed in the U.S. District Courts for the Central District of California (Case No. 12-06911) and the Southern District of New York (Case No. 12-6166), as well as the Circuit Court for Montgomery County, Alabama (Case Nos. 03-CV-2012-901035.00,03-CV-2012-901036.00,03-CV-2012-901037.00), are similar to others filed by the FDIC, the NCUA, and the FHFA.