U.S. regulator sues major banks over mortgages

WASHINGTON/NEW YORK Fri Sep 2, 2011 4:17pm EDT

WASHINGTON/NEW YORK (Reuters) - A U.S. regulator sued a series of big banks on Friday over losses on more than $41 billion in subprime mortgage bonds, which could hamper a broader government mortgage settlement with banks.

The FHFA accused major banks, including Bank of America Corp (BAC.N), its Merrill Lynch unit, Barclays (BARC.L), Citigroup (C.N) and Nomura (8604.T), of selling bonds backed by mortgages that should have never been packaged into securities.

(Reporting by Margaret Chadbourn in Washington and Jonathan Stempel in New York; Additional reporting by Lauren LaCapra in New York; Writing by Ben Berkowitz and Dan Wilchins; Editing by Carol Bishopric)

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