WASHINGTON, Tue May 22, 2012 – The U.S. government has filed three lawsuits against a group of large banks over losses on soured mortgage debt purchased by two small Illinois banks that failed in 2009.
Acting as receiver for Citizens National Bank and Strategic Capital Bank, the Federal Deposit Insurance Corp. sued a number of banks including Bank of America Corp., Citigroup Inc., Deutsche Bank AG and JPMorgan Chase & Co.
Seeking a combined $92 million, the lawsuits accuse the banks of misrepresenting the risks of residential mortgages they packaged into securities, causing losses for investors once the poor quality and defective underwriting became evident.
The lawsuits were filed on Friday by the law firm Grais & Ellsworth, which has filed many such lawsuits for other clients over residential mortgage securities.
Two FDIC lawsuits were filed in Manhattan federal court and seek a combined $77 million, while a third filed in Los Angeles federal court seeks $15 million.
Bank of America and Citigroup are the only banks named as defendants in all three cases. Deutsche Bank and JPMorgan are defendants in two cases, and Ally Financial Inc., Credit Suisse Group AG, HSBC Holdings Plc., Royal Bank of Scotland Group Plc., UBS AG in one.
Bank of America spokesman Bill Halldin, Citigroup spokesman Scott Helfman and Deutsche Bank spokeswoman Renee Calabro declined to comment. Spokespeople for JPMorgan did not immediately respond to requests for comment.
David Grais, a lawyer representing the FDIC, declined to comment, as did FDIC spokesman David Barr.