The Federal Deposit Insurance Corp. (FDIC) is suing CITIgroup and U.S. Bank for the over $695 million it lost from selling mortgage-backed securities once owned by a now-defunct Texas bank, according to Reuters.
The FDIC acted as receiver for Guaranty Bank in Texas, which purchased almost $3 billion of the securities.
The regulator alleges the banks failed to properly underwrite the loans and many of them had to be bought back. The securities were issued from 2005 to 2007 and sponsored by two banks now owned by JP Morgan Chase and Bank of America Corp., respectively.
According to Reuters, the FDIC has reached $1.83 billion in settlements over MBS sold to banks it has taken into receivership.
A federal regulator is suing two of the country’s biggest banks for hundreds of millions in a mortgage-backed securities case.