Lawsuits by the Federal Housing Finance Agency that charge Bank of America (BAC), Citigroup (NYSE: C), HSBC and Credit Suisse (CS) with wrongdoing in the sale of securities backed by residential mortgages may advance, a federal judge in Manhattan ruled Wednesday.
Separately, Wells Fargo (WFC) said Wednesday it has been notified by the staff of the Securities Exchange Commission that the staff does not plan to recommend any enforcement action against the bank in connection the sale of mortgage-backed securities.
U.S. District Judge Denise Cote, of the Southern District of New York, made the rulings in the FHFA suits, which are among 16 cases before Cote the agency has brought involving charges of misconduct by underwriters of securities backed by residential mortgage loans that Fannie Mae and Freddie Mac purchased over a roughly two-year period beginning in 2005. FHFA filed the lawsuits last December as part of its role as conservator for Fannie and Freddie.
Cote had previously ruled that the FHFA may proceed with lawsuits against JPMorgan Chase (JPM), Barclays, Goldman Sachs (GS), Deutsche Bank, Morgan Stanley (MS) and Bank of America's Merrill Lynch unit.
"The court has already issued numerous opinions resolved motions to dismiss in other cases brought by the FHFA," Cote wrote in a series of orders allowing the lawsuits to proceed against Bank of America, Citigroup, HSBC and Credit Suisse. "The prior opinions comprehensively address the arguments in support of dismissal raised by the defendants in the present case; the court hereby adopts by reference the reasoning of these opinions and — to the extent they are relevant — their holdings."
Spokespeople for Bank of America, Credit Suisse, HSBC and Citigroup all declined to comment on the ruling.
Though Cote has issued a protocol to govern depositions, which are expected to begin in January, the litigation may hinge on the outcome of an appeal by UBS to the U.S. Court of Appeals for the 2nd Circuit that the parties argued on Monday. UBS has asked the 2nd Circuit to decide whether FHFA waited too long to file the suits.
For its part, Wells Fargo said in a filing with the SEC that the company received word on Nov. 20 from the agency that an investigation by the SEC's staff into the bank's practices in the run-up to the mortgage meltdown has been completed.
Still, the company continues to battle the government over its underwriting practices. A lawsuit in October by the Manhattan U.S. Attorney's office accuses Wells Fargo of wrongdoing in connection with loans insured by the Federal Housing Administration over roughly a decade beginning in May 2001.
Wells Fargo has asked a federal judge in Washington, D.C., to block the government from pursuing the case, which the company contends is barred by the multistate mortgage settlement.