On Thursday, the Federal Housing Finance Agency announced that it was able to recover close to $8 billion in taxpayer money last year, through litigation with seven financial institutions that had sold mortgage-backed securities to government-backed agencies Fannie Mae and Freddie Mac. The securities were sold in the months leading to the worldwide financial crisis and housing market crash.
A total of 17 banks were sued by the FHFA, which regulates Fannie and Freddie, in 2011, with the suit alleging that the institutions had ran afoul of securities laws and knowingly committed fraud in some instances. An 18th bank, Swiss bank UBS, was sued separately on similar charges.
A total of $200 billion in residential mortgage-backed securities were sold in the prelude to the economic crisis, all of which had eventually gone bad.
Last year, the FHFA had settled with six financial institutions that were sued in 2011, namely Citigroup (NYSE: C), Deutsche Bank (DB), General Electric (NYSE: GE), JPMorgan Chase (NYSE: JPM), UBS, and Ally Financial. A seventh financial institution, Wells Fargo, was not named on the original suit, but had settled separately by paying $335 million.
Some banks, such as GE, Citi and Ally Financial, had settled last year, but the terms of the settlement were not disclosed by the FHFA as some settlements were still being worked out. Most recently, the FHFA announced this week that it had recouped $475 million from Ally, $250 million from Citigroup, and $6.25 million from GE. JPMorgan had paid out $4 billion, making the New York-based institution the bank that had paid the most in accordance with the lawsuit.