Feds Plan Mortgage Suit Against Banks: Report

NEW YORK (TheStreet) -- Bank of America (BAC), JPMorgan Chase (JPM) and several other large banks will be sued by a federal housing regulator over billions in mortgage loans that were packaged and sold to investors, according to the New York Times.

The Federal Housing Finance Agency (FHFA) will file a lawsuit in the next several days against "more than a dozen big banks" saying that they misrepresented the quality of loans later bundled into mortgage-backed securities (MBS), according to the article.

The newspaper cites three sources familiar with the matter, adding that the deadline to file the legal action is September 6.

The suit will argue that the banks did not comply with federal securities laws by failing to perform due diligence on thousands of loans which were backed by either false or inadequate information. Many of the loans later defaulted and MBS investors faced severe losses.

The FHFA oversees government-sponsored enterprises Fannie Mae and Freddie Mac. Both housing agencies own a total of $30 billion in MBS investments, the article states.

The federal lawsuit comes also comes on the heels of several bank missteps in regards to mortgages.

On Monday the Federal Deposit Insurance Corp. filed an objection to $8.5 billion investor settlement with Bank of America over poorly performing and documented loans.

Earlier Thursday it was also reported that a settlement was reached between Goldman Sachs (GS) and the State of New York over so-called "robo-sigining" practices. In those cases, state regulators accused banks of falsifying or ignoring documentation requirements on home foreclosures.