By Nate Raymond
NEW YORK, Nov 28 (Reuters) - A U.S. judge kept alive a
federal regulator's lawsuits against big banks including Credit
Suisse Group AG and Bank of America Corp over allegations they
misled Fannie Mae and Freddie Mac into purchasing billions of
dollars worth of risky mortgage debt.
The rulings, by U.S. District Judge Denise Cote in
Manhattan, were the latest in a series of decisions allowing the
Federal Housing Finance Agency to proceed with lawsuits against
banks it blames for losses incurred by Fannie and Freddie.
The FHFA, which regulates Fannie and Freddie, last year sued
18 banks over the housing finance giants' losses on more than
$200 billion in mortgage-backed securities. The lawsuits accuse
the banks of misrepresenting the quality of the loans underlying
the securities and violating U.S. securities laws.
The banks have denied the regulator's allegations and argued
they should be dismissed. Among the arguments by the defendants
is a contention that the lawsuits were filed after the statute
of limitations had expired.
In a series of four brief orders, Cote allowed the FHFA
lawsuits to move forward against several defendants, which also
include HSBC Holdings Plc and Citigroup Inc. Representatives for
those banks and for Bank of America and Credit Suisse, declined
In addition to these lawsuits, the banks face various
investor lawsuits and government investigations into their roles
in the sale of mortgage-backed securities. Those mortgage debt
products were at the heart of the financial crisis following
declines in housing prices and mounting foreclosures.
Cote has previously allowed FHFA lawsuits to move forward
against defendants including Goldman Sachs Group Inc, Deutsche
Bank AG, Bank of America's Merrill Lynch unit, JPMorgan Chase &
Co, Barclays Plc, and Morgan Stanley.
Her newest decisions came two days after the 2nd U.S.
Circuit Court of Appeals heard arguments on whether to reverse a
May ruling by Cote that allowed a FHFA's lawsuit against UBS AG
to move forward. UBS, which faces a January 2014 trial
date, was the first bank the FHFA sued and the first lawsuit
Cote had allowed to proceed.
A ruling for UBS reversing Cote's decision would affect not
just that lawsuit but the others, said Donald Hawthorne, a
lawyer with Axxin Veltrop Harkrider who has been involved in
suing financial companies over mortgage-backed securities.
"That would be the remaining potential stumbling block," he
said. "With that out of the way, she clearly is intending to
pursue these cases vigorously."
The four lawsuits Cote ruled on Wednesday targeted sales of
$14.1 billion in mortgage-backed securities sponsored by Credit
Suisse; $6.2 billion by HSBC; $6 billion by Bank of America, and
$3.5 billion by Citigroup.
A day earlier, Cote largely allowed FHFA lawsuits against
Nomura Holdings Inc, First Horizon National Corp and Societe
Generale to proceed as well. Spokesmen for Societe Generale and
Nomura declined comment. First Horizon was not immediately
available for comment.
The cases in the U.S. District Court, Southern District of
New York are Federal Housing Finance Agency v. Credit Suisse
Holdings (USA), Inc., 11-06200, Federal Housing Finance Agency
v. Citigroup, Inc., 11-06196; Federal Housing Finance Agency v.
Bank of America Corporation, 11-06195; Federal Housing Finance
Agency v. HSBC North America Holdings Inc., 11-06189.
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