In the long ongoing battle for the financial services industry over mortgages, current signals have investors concerned of what is probable to be an extensive and costly battle. Numerous investors such as Charles Schwab and the Federal Home Loan Bank are suing the Major American financial services company Citigroup. Investors are suing the company “in an effort to force Citigroup to buy back soured mortgages that the investors contended did not conform to proper underwriting standards.”
Similarly, Bank of America is dealing with a lawsuit regarding investors holding $375 billion worth of mortgage securities. Fortunately for Bank of America a federal court in California, cutting that $375 billion worth of mortgage securities to $54 billion, dismissed a lawsuit. The dismissal of this lawsuit is a foremost victory for Bank of America. Yet there are still various legal issues regarding banks to buy back defaulted mortgages. Bank of America has other investors including the Federal Reserve Bank of New York and Primco that haven’t pursued any lawsuits. This could lead to another potential lawsuit that would set back Bank of America severely. These legal issues have arose concerns as to wither efforts to force banks to buy back defaulted mortgages could potentially lead to a more extensive and costly battle for the industry. Forcing industries to buyback these mortgages “will not be resolved quickly or cheaply,” said CEO, Brain Maynihan of Bank of America. Estimated costs could total tens of billions of dollars for these major industries. This being present, shares of the big banks are decreasing rapidly. These ongoing issues are clearly a major set back for Citigroup and Bank of America. After these extensive battles between the investors and the industries are over it will be interesting to see the impact of these lawsuits on the industries.
Resources:
http://dealbook.blogs.nytimes.com/2010/11/05/banks-face-more-demands-to-buy-back-bad-loans/
