Chicago FHLB Accuses Banks Of Unloading Crappy RMBS On Them; Lawsuit: We Unwittingly "Purchased A Toxic Stew Of Doomed Mortgage Loans"

Bloomberg News reports:

• Federal Home Loan Bank of Chicago sued lenders including Bank of America Corp. claiming their failure to disclose relaxed subprime mortgage underwriting standards, led it to unknowingly buy risky mortgage-backed securities. The lawsuit was filed an Illinois state court in Chicago(1) by the congressionally chartered wholesale bank, which describes itself on its website as one of 12 regional U.S. institutions serving smaller retail home lenders.

• Bank of America and the other defendant commercial banks, including Citigroup Inc., Goldman Sachs Group Inc. and Wells Fargo & Co., sold it more than $3.3 billion in residential mortgage-backed securities, according to the complaint.

• “The defendants did not tell the bank the truth about the loans that comprised the mortgage pools,” underlying the securities, the Federal Home Loan Bank alleged. While it believed it was acquiring “safe” securities, “in fact the bank purchased a toxic stew of doomed mortgage loans,” according to the complaint.

For more, see Bank of America Sued by Chicago Home Loan Bank Over Subprime Mortgages.

See also the Announcement from the Federal Home Loan Bank of Chicago.

For the Illinois lawsuit, see Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation, et al.

(1) According to their announcement, the FHLB of Chicago also filed similar suits in the Superior Court of California, County of Los Angeles; and the Superior Court of Washington, King County. The announcement went on to say that the FHLB of Indianapolis also filed similar complaints on the same day, and that the FHLBs of Pittsburgh, Seattle, and San Francisco have previously filed similar lawsuits.