Institutional Investors Are Suing Financial Firms Over the Mortgage Mess


Major institutional investors such as Charles Schwab, PIMCO, and the Federal Home Loan Bank of Chicago are suing firms like Citigroup, Wells Fargo, and Bank of America to force them to buy back billions of dollars of mortgages and mortgage-backed securities that allegedly failed to conform to underwriting standards, according to Nelson D. Schwartz, “Banks Brace for Costly Fights Over Mortgage Mess.”

According to the blog, however, a lawsuit brought by the Maine State Retirement System and others against Bank of America was dismissed by a federal court in California, underscoring the legal challenges such plaintiffs face.

Echoing an oft-heard mantra, Bank of America’s lawyers contended that any loss of value stemmed from the economic downturn rather than an underlying problem with how the mortgages were sold to investors or have been serviced.

According to J. Boyd Page of Page Perry in Atlanta, “the key to success in these cases may well depend on the banks’ knowledge and perception of market conditions and risks at the time of sale. In 2005 , 2006 and 2007, many financial firms had internal studies or opinions confirming their awareness of the risks of a housing market implosion. In other words, many foresaw the serious risks of what ultimately happened. In those circumstances, the sales of mortgages and mortgage-backed securities without attendant disclosure of the risks would seem likely to survive motions to dismiss or motions for summary judgment.”

Wall Street is worrying that such lawsuits could present long and expensive fight for the banks. Some analysts estimate the eventual cost could total tens of billions of dollars.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions, and have aided clients who have been the victims of financial adviser abuse and scams. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their investment problems. For further information, please contact us.