SEATTLE, Sept. 9 (UPI) -- Nearly two dozen former Washington Mutual managers are facing lawsuits tied to allegedly misrepresented mortgage-backed securities, court papers say.
The lawsuit was filed by the Federal Housing Finance Agency, which has oversight over the Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association, Freddie Mac and Fannie Mae, which bought $12.9 billion in bundled securities from Washington Mutual, known as WaMu, and Long Beach Mortgage, a subsidiary of the bank, from September 2005 through June 2007, The Seattle Times reported Friday.
The securities were allegedly misrepresented by the bank with documents inflating the value of the homes and underestimating risk factors.
The lawsuit says Freddie Mac purchased $870.7 million in bundled securities from WaMu in February 2006. The mortgages, rated AAA by two major credit rating agencies, were sold as a bundle with 73 percent of the mortgages having a loan-to-value ratio of 80 percent or lower.
The ratio refers to the value of the loan versus the value of the home, making a lower number a measure of reduced risk. The lawsuit says less than 50 percent of the mortgages in the package turned out to have ratios lower than 80 percent.
To date, 56 percent of the loans in the package have defaulted, the Times said.
The lawsuit names WaMu and its mortgage subsidiary Long Beach Mortgage and 23 former managers, including former Chief Financial Officer Thomas Casey and former head of the Home Loans group Craig Davis.
It is connected to a lawsuit against JPMorgan Chase, which purchased a majority of WaMu's assets in 2008.