Bloomberg News

FHFA Says Estimates on Damages From 17 Banks Are Premature

September 06, 2011

(Updates with excerpt from FHFA statement in third paragraph.)

Sept. 6 (Bloomberg) -- The U.S. Federal Housing Finance Agency, which sued 17 banks over $196 billion in mortgage-backed securities bought by Freddie Mac and Fannie Mae, said it’s premature to estimate how much it may recover.

Damage estimates that said the FHFA is seeking about $200 billion from its suits -- the total cost of the securities -- are “excessive,” the agency said today in a statement it called “a fuller statement of purpose.”

The agency, which represents the interests of Freddie Mac and Fannie Mae, mortgage-finance companies under government conservatorship, said actual damages would reflect “losses incurred” or recoveries determined by evidence or judicial findings.

In the relief section of the agency’s Sept. 2 complaints against the banks, including Bank of America Corp. and JPMorgan Chase & Co., its first demand for relief asked for a “rescission and recovery of the consideration” Fannie Mae and Freddie Mac paid the mortgage-backed securities.

Using the purchase price for the securities to gauge damages doesn’t reflect repayments of principal or the remaining value of the securities, which would offset any recovery, the agency said in the statement.

“Such numbers reflect the original amount of such securities purchased, not the losses incurred or the potential recoveries at the end of this process,” the agency said in the clarifying statement.

The cases are Federal Housing Finance Agency v. Bank of America Corp., 11-CV-6195; FHFA v. Barclays Bank Plc., 11-CV- 6190; FHFA v. Citigroup, 11-CV-6196; FHFA v. Credit Suisse Holdings (USA) Inc., 11-CV-6200; FHFA v. Deutsche Bank AG, 11- CV-6192; FHFA v. First Horizon National Corp., 11-CV-6193; FHFA v. Goldman, Sachs & Co., 11-CV-6198; FHFA v. HSBC North America Holdings Inc., 11-CV-6189; FHFA v. JPMorgan Chase & Co., 11-CV- 6188; FHFA v. Merrill Lynch & Co., 11-CV-6202; FHFA v. Nomura Holding America Inc., 11-CV-6201; FHFA v. SG Americas Inc., 11- CV-6203, U.S. District Court, Southern District of New York (Manhattan).

Also: FHFA v. Ally Financial Inc.; FHFA v. Countrywide Financial Corp.; FHFA v. General Electric Co.; FHFA v. Morgan Stanley, New York State Supreme Court, New York County (Manhattan).

And: FHFA v. Royal Bank of Scotland, 11-CV-1383, U.S. District Court, District of Connecticut (New Haven).

--Editors: Patrick Oster, Fred Strasser

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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