FHLB Of San Francisco Sues To Void $19.1B+ Purchase Of Crappy Mortgage-Backed Securities; Says Dealers BS'd About Quality Of Underlying Home Loans

The Federal Home Loan Bank of San Francisco announced:

• [T]he Federal Home Loan Bank of San Francisco(1) (Bank) filed complaints in the Superior Court of California, County of San Francisco, against nine securities dealers in relation to certain of the Bank’s investments in private-label residential mortgage-backed securities (PLRMBS). The Bank is seeking to rescind its purchases of 134 securities in 113 securitization trusts, for which the Bank originally paid more than $19.1 billion. The Bank’s complaints allege that the dealers made untrue or misleading statements about the characteristics of the mortgage loans underlying the securities. All of the PLRMBS in the Bank’s mortgage portfolio, including those identified in the complaints filed today, were rated AAA when purchased, based on the information provided by the securities dealers.

For the entire press release, see Statement Regarding PLRMBS Litigation.

See also, The New York Times: Pools That Need Some Sun.

Thanks to Rob Harrington for the heads-up on the press release.

(1) According to its website, the Federal Home Loan Bank of San Francisco helps meet the borrowing needs of communities by providing wholesale credit products and services to member financial institutions. The Bank is privately owned by its members, which include commercial banks, savings institutions, credit unions, thrift and loan companies, and insurance companies headquartered in Arizona, California, and Nevada. We are part of a network of 12 regional Federal Home Loan Banks chartered by Congress in 1932 to provide low-cost credit to residential housing lenders.