In the wide-ranging litigation against banks that sold mortgage-backed securities to two government-sponsored enterprises, Fannie Mae and Freddie Mac, Judge Cote issued a decision Monday largely denying a motion to dismiss brought by certain of the banks.  The plaintiff Federal Housing Finance Agency (or “FHFA,” as conservator for Fannie Mae and Freddie Mac) claims that the banks’ offering documents falsely described the strength of the loans and the underwriting process.  As evidence of fraud, FHFA pointed out that the ratings agencies substantially downgraded the securities after the banks sold them.  The banks argued that this was simply “fraud by hindsight,” especially because of the intervening financial crisis.  Judge Cote rejected that argument:
Continue Reading Judge Cote Allows Fannie Mae and Freddie Mac Conservator to Proceed With Claims Against Banks