US regulator to sue major banks over mortgages

A US regulator is filing lawsuits against major banks, accusing them of bundling subprime home loans into bonds that should have never been sold to investors, and causing billions of losses for mortgage giants Fannie Mae and Freddie Mac, a source said.

The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, is suing major banks soon, in a move that will deepen the mortgage litigation morass for banks.

Fannie Mae and Freddie Mac guarantee bonds backed by mortgages, and are a crucial pillar for US housing finance.

News of the lawsuits was first reported last night on the website of the New York Times.