Amidst all the controversy over UK banks for the part they played in mis-selling payment protection insurance to the tune of billions of pounds, the news for many of those lenders just got worse. Government recently ordered high street banks and other lenders to refund payment protection insurance, PPI, that was mis sold and now those very same banks are facing billions more in court suits as they face being sued by the US.
It appears as though some of the leading banks in the UK knowingly sold toxic mortgage debt to Freddie Mac and Fannie Mae in the months leading up to the mortgage market meltdown of 2008 and 2009. These banks failed to heed advice from third party disinterested advisors before they sold billions of US dollars of bad debt, toxic debt. This information is gained from reading court documents filed in the suit.
In the papers which were released by the FHFA, the US Federal Housing Finance Agency, it is alleged that UK banks such as HSBC and RBS hired the advisement services of Clayton Holdings from a period in early 2006 to mid 2007. As part of Holdings risk assessment loans were to be evaluated before being placed in mortgage backed securities bundles. In all there are 17 banks being sued as the US tries to recover £120 billion which they say was knowingly bad debt bundled into the securities sold to the US.
Of the three largest banks named in the suit, only RBS said it planned to fight the suit whilst Barclays and HSBC declined to comment. It is noted that RBS was a huge player because of their role in the sub-prime market whilst HSBC was relatively insignificant in the issue at hand. This may take years to battle out in the courts, but it comes at a time when high street banks have already lost their once reputable images due to the PPI scandal. This gives cause to wonder what is next?
