Is The FDIC Doing Death By 1000 Cuts Against TBTF Banks?

mersJust when you think Justice will never be done, another civil lawsuit is filed. The FDIC filed three lawsuits against Goldman Sachs, JP Morgan Chase and BoA among others for peddling bad mortgage backed securities stuffed with toxic mortgages to their sucker, Guaranty Bank of Austin, Texas. Guaranty Bank later failed in 2009. Housing Wire:

This week, the regulator filed multiple lawsuits in Travis County (Austin), suggesting Guaranty suffered major losses from toxic RMBS loans sold and packaged by mega banks and other financial institutions.

Defendants named in the multibillion-dollar lawsuits include Countrywide, JPMorgan Chase ($38.04 0%), Ally Financial, Deutsche Bank Securities ($34.07 0%), Bank of America ($8.19 0%) and Goldman Sachs ($105.32 0%) among others.

FDIC, on behalf of Guaranty, claims the banks misrepresented loan-to-value ratios, underwriting criteria and appraisal amounts when selling, packaging and underwriting home loans that became collateral for mortgage securities sold to Guaranty.

Don't get excited, while the banks named in the FDIC complaints sold Guaranty an estimated $5.4 billion worth of toxic stuffed mortgage backed securities, the FDIC wants $900 million in one civil lawsuit and $667 million in another. There is a third legal complaint where the FDIC seeks $559.7 million. The tally comes to $2.1 billion in damages, not exactly $5.4 billion never mind additional punitive damages.

In the third complaint, the FDIC demands $559.7 million from these defendants, which charged Guaranty Bank $1.5 billion for eight certificates: Countrywide Securities Corp.; CWALT, Inc.; Countrywide Financial Corp.; Bank of America Corp.; Deutsche Bank Securities; and Goldman, Sachs & Co.

Last week the FDIC sued on behalf of yet another failed bank, Colonial. The civil suit is for the same mortgage backed securities toxic asset packing scam.

The Federal Deposit Insurance Corp. (FDIC) has filed a lawsuit against major banks over the alleged sale of $388 million of risky mortgage-backed securities (MBS) to the failed Colonial Bank. Apart from attorney fees and court expenses, the FDIC is seeking $189 million in damages.

Colonial Bank-based in Montgomery, Alabama failed in August 2009 and was acquired by BB&T Corp. ( BBT ). At that time, Colonial Bank had nearly $25 billion in assets and the FDIC had estimated the cost to the federal deposit-insurance fund to be $2.8 billion.

The major lenders against whose units the FDIC filed the lawsuit include biggies like JPMorgan Chase & Co. ( JPM ), Bank of America Corporation ( BAC ), Citigroup Inc. ( C ), Wells Fargo & Company ( WFC ), Deutsche Bank AG ( DB ), Credit Suisse Group ( CS ), HSBC Holdings plc ( HBC ), UBS AG ( UBS ), Ally Financial Inc. and The Royal Bank of Scotland Group plc ( RBS ), among others. The FDIC has alleged that the lenders distorted the facts related to the MBS they sold to Colonial Bank.

Moreover, the FDIC accused the banks of not disclosing authentic facts related to the quality of the underlying assets while selling risky MBS to Colonial Bank. This also included distortion of loan-to-value ratios that were based on the inflated property values. Further, the fact that a large number of these properties had second mortgages was also concealed.

The biggest glimmer of hope for justice are the filings details. The FDIC is claiming the named banks lied and more importantly stuffed these residential mortgage backed securities with 60% crap. They took a random sampling and easily found a systemic packing of securities with questionable mortgages.

Defendants made untrue statements or omitted important information about such material facts as the loan-to-value ratios of the mortgage loans, the extent to which appraisals of the properties that secured the loans were performed in compliance with professional appraisal standards, the number of borrowers who did not live in the houses that secured their loans (that is, the number of properties that were not primary residences), and the extent to which the entities that made the loans disregarded their own standards in doing so.

Since the FDIC seems to be taking on the Banksters, one failed bank at a time, we can only hope these actions continue. There were 414 failed banks from 2008 to 2011. This year already has 38 bank failures.

Not to be outdone, BoA is suing the FDIC for one of the failed banks mortgage fraud scheme to the tune of $1.75 billion. Talk about calling the kettle black and gall. Lest we not forget BoA is Countrywide.

Bank of America Corp (BAC). can proceed with its 2010 lawsuit against the Federal Insurance Deposit Corp. over $1.75 billion in corporate client losses stemming from a mortgage-fraud scheme at failed lender Taylor, Bean & Whitaker Mortgage Corp., a federal bankruptcy judge said.

U.S. Bankruptcy Judge Jerry Funk in Jacksonville, Florida, who is overseeing the bankruptcy of Ocala Funding LLC, a financing vehicle used and controlled by Taylor Bean, ruled today that the bank’s pursuit of the FDIC in a case in Washington wouldn’t interfere with the Florida proceedings.

So far civil lawsuits, fines have been slaps on the wrist and we know the DOJ is not pursuing criminal prosecutions against the big banks. Surely there are many more failed banks who unsuspectingly bought that AAA rated pure crap which later caused their own demise.