Mortgage

FDIC targets banks over soured mortgage debt

The FDIC - Federal Deposit Insurance Corp. is suing several big banks over soured mortgage securities that were purchased by failed lenders the regulator seized in 2009.

In three separate suits filed Friday in federal court, the FDIC contends that banks including Bank of America Corp., J.P. Morgan Chase, Citigroup Inc. and Credit Suisse Group misrepresented the quality of mortgage loans packed into securities.

Two of the suits, including one in New York and one in California, were filed by the FDIC as the receiver for Strategic Capital Bank. The other, filed in New York, was filed by the agency as the receiver for both Citizens National Bank and Strategic Capital Bank.

The FDIC seized the Illinois banks in May 2009.

Combined, the three suits seek at least $92 million in damages, according to the complaints.

A spokesman for the FDIC declined to comment Monday as did several of the banks.

The FDIC has been actively pursuing claims against lenders and bank executives over activities leading up to the financial crisis, which resulted in a wave of bank failures. In December, the agency settled a civil lawsuit for $65 million against three former executives of Washington Mutual Inc., whose allegedly reckless behavior led to the bank's collapse.

(Published by WSJ - May 21, 2012)