Documents released by the US Federal Housing Finance Agency (FHFA) claim that Royal Bank of Scotland (RBS) and HSBC retained the services of Clayton Holdings, a risk analysis specialist, to scrutinize loans before they were placed in bundles of mortgage-backed securities.
According to the filings, reports from Clayton show that 18 percent of the mortgage loans RBS submitted to Clayton between the first quarter of 2006 and the second quarter of 2007 were rejected. However, 53 percent of them were subsequently included in debt packages by the bank.
By contrast, 27 percent of the mortgage loans HSBC submitted to Clayton were rejected, although 62 percent of these were eventually included. RBS and HSBC are among 17 banks being sued by US regulators to recoup the $196bn (£120bn) Fannie Mae and Freddie Mac spent on mortgage-backed securities. RBS is facing action over $30.4bn of sales, HSBC over $6.2bn and Barclays in relation to $4.9bn.
Fannie Mae and Freddie Mac were bailed out by the US government at the height of the financial crisis having lost billions of dollars due to the collapse of the sub-prime mortgage market.
With access to cheap funding, both bought hundreds of billions of dollars of mortgage debt – including large amounts of sub-prime loans – after rules over what type of securities they could hold were changed in the 1980s.
Hi, I'm Jen and I'm here to help. Submit your complaint here or get help here
This article, RBS and HSBC package bad loans, sued in US, is just one of our articles from our Online Personal Finance Help Center
We help with your complaints and explain personal finance
Online Personal Finance Help Center monitors banking problems and customer complaints and has done so since 1999. Writers hold no stock positions. Some material is used under the fair use copyright act.
We use Thomson Reuters News Service Calais in all production material but are not associated with Thomson Reuters, banks, or financial institutions in any way.
What people searched for to find this article:
One Trackback
[...] packaged loans into subprime pools that it KNEW had been rejected by its own damn risk analysts! RBS and HSBC package bad loans, sued in US You know, you just embarrass yourself when you act as if you know something and you so obviously [...]