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UK banks face US legal action over securities

The body which oversees American mortgage companies  bailed out during the financial crisis has filed legal action against 17 banks including Royal Bank of Scotland, Barclays and HSBC.

The Federal Housing Finance Agency, which acts as conservator for Fannie Mae and Freddie Mac, alleges the banks violated federal security laws and common law during the sale residential mortgage-backed securities.

In a statement, it says: “Based on our review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided.”

“Each complaint seeks compensatory damages for negligent misrepresentation…The complaints filed today reflect FHFA’s conclusion that some portion of the losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities are attributable to misrepresentations and other improper actions by the firms.”

According to the BBC, RBS says it has will defend itself vigorously against the charges and that it has a “substantial” legal and factual defences against the claims. HSBC and Barclays declined to comment on the legal action.

Other banks facing action include Morgan Stanley, Merrill Lynch & Co and Citigroup Inc.

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