The Federal Deposit Insurance Corp. (FDIC) has sued Bank of America, Citigroup, JPMorgan Chase and other banks for a cumulative $92 million in damages on MBS, alleging that shoddy appraisals and other underwriting defects tainted their sale.
The litigation stems from the FDIC's role as receiver for Illinois' Strategic Capital Bank and Citizens National Bank, both of which failed in 2009.As the receiver for the failed banks, the FDIC has filed three suits to recover the banks' losses on its own behalf. The suits, which were brought by Grais & Ellsworth in California and New York federal courts, closely resemble those filed by the firm for other clients. But the FDIC's willingness to act as a plaintiff in this and similar cases lends credibility to the attorneys' legal strategy. The FDIC's suits allege that Countrywide and the banks that issued the security delivered false assurances about the quality of the portfolio's underwriting. More than half the loans included in three securitizations failed to meet quality benchmarks laid out by the issuer, the suit says.