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Financial Services Law Insights and Observations

FDIC discusses post-financial crisis legal claims and enforcement proceedings

Bank Regulatory Federal Issues FDIC Enforcement RMBS

Recently, the FDIC reported on legal claims and enforcement proceedings taken by the agency during the financial crisis in the years from 2008 to 2013. During this time period, the FDIC stated it “pursued and defended more legal claims in both its receivership and corporate capacities than during the savings and loan and banking crisis of the 1980s and early 1990s.” In its receivership capacity, the FDIC investigated and litigated many professional liability claims and sought to enter and collect on criminal restitution and forfeiture orders related to failed banks. The agency also pursued many enforcement claims and other actions related to both open and failed banks in its corporate capacity. The report discussed numerous topics, including the FDIC’s investigation into the residential mortgage-backed security (RMBS) portfolios of failed insured depository institutions (IDIs), which often “revealed that RMBS portfolios suffered heavy losses because the credit quality of loans collateralizing the RMBS was much lower than the credit quality represented in the RMBS offering documents.” Ultimately, 19 lawsuits were filed by the FDIC on behalf of eight receiverships seeking damages based on the IDIs’ purchases of RMBS. Other significant topics discussed within the report focus on LIBOR suppression claims, residential mortgage malpractice and/or mortgage fraud, criminal claims and recovery, income tax refund litigation, and administrative enforcement proceedings, among others.