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Friday, Sep 2, 2011 1:11 PM UTC

Reports: US to sue big banks over risky mortgages

Federal Housing Finance Agency could file suit over misclassified mortgages within days

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Topics: Mortgage Crisis,

Reports: US to sue big banks over risky mortgagesIn this Aug. 26, 2011 photo, a trader works on the floor of the New York Stock Exchange, in New York. World stock markets rose on Monday, Aug. 29, 2011, heartened by Federal Reserve chief Ben Bernanke's call on the U.S. government to help the economy and his refusal to rule out more monetary stimulus by the central bank. (AP Photo/Jin Lee)(Credit: AP)

Published reports say the U.S. government is planning to sue some of the country’s largest banks over mortgage-backed securities they sold that lost value in the housing market collapse, alleging they misclassified their quality.

The reports say the government would seek billions of dollars in losses in compensation. The reports cited people that were not identified.

The New York Times and The Wall Street Journal say the Federal Housing Finance Agency, which oversees mortgage buyers Fannie Mae and Freddie Mac, could file a lawsuit within days.

The reports say securities that were backed by subprime and other risky loans but were deemed safe investments by ratings agencies are the ones at issue in this case.

The Times says the FHFA would not seek recovery of the total amount of the loans because some still have value.

Associated Press

More Associated Press.

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  • The protests take on a festive element as police forces move out of the park and square. Wearing a gas mask, this young man dances to traditional Turkish music in front of Taksim Square’s Ataturk Monument.

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