Homeowners are not the only ones that suffer when mortgage debt issues arise. Although they may take the brunt of the impact, mortgage debt goes far beyond the pockets of homeowners. Mortgage security investors also take a hit in the form of losses. Now, several big banks are being sued over investor losses due to misrepresenting some mortgages.
Risk In Investing
The U.S. government filed three lawsuits against a group of banks over losses suffered by investors from mortgage debt troubles. Back in 2009, several banks purchased bad mortgages and sold the securities to investors prior to failing shortly thereafter. The failed banks are accused of misrepresenting the risks of these mortgages and engaging in defective underwriting procedures. Seeking a combined $92 million the lawsuits were filed in federal court earlier this week, two in a Manhattan federal court and one in Los Angeles federal court.
Unfortunately, this isn’t the first of such lawsuits to be filed against banks for misrepresenting mortgage securities to investors as there have been dozens of similar suits filed since the 2008 financial crisis began. At least 549 mortgage officers and 63 different lending institutions have been involved in similar liability lawsuits.