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Federal Home Loan Bank Sues Over Mortgage Securities

By Karen Gullo and Jody Shenn

March 16 (Bloomberg) — The Federal Home Loan Bank of San Francisco sued nine securities dealers alleging they misled it about the credit quality and risks of loans behind $19.1 billion in private-label residential mortgage-backed securities.

Units of Credit Suisse Group AG, Deutsche Bank AG, JPMorgan Chase & Co. and Bank of America Corp. were among the defendants named in two securities complaints filed yesterday in state court in San Francisco, according to the court’s Web site. The bank is seeking to rescind its purchases of the securities, which were rated AAA “based on the information provided by the securities dealers,” the Federal Home Loan Bank said in a statement on its Web site.

“The bank’s complaints allege that the dealers made untrue or misleading statements about the characteristics of the mortgage loans underlying the securities,” according to the statement.

The dealers made false statements or omitted important information about the loans that backed the securities they sold, the bank alleged in its complaints. The bank claims the dealers failed to disclose that appraisals were biased upward on properties that secured mortgage loans, that underwriting guidelines were ignored by originators and that loan to property value ratios were exaggerated…

4closureFraud

Here is the first case…

Federal-Home-Loan-Bank-of-San-Francisco-v-Deutsche-Bank-Securities-Inc-Et-Al