Judge narrows Fannie/Freddie lawsuit against Barclays

NEW YORK Mon Nov 19, 2012 5:26pm EST

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NEW YORK (Reuters) - A U.S. judge on Monday pared down a federal regulator's lawsuit accusing Barclays Plc (BARC.L) of misleading Fannie Mae and Freddie Mac, which bought risky mortgage debt worth billions of dollars between October 2005 and February 2007.

Judge Denise Cote of U.S. District Court in Manhattan dismissed some claims based on state securities law in the lawsuit by the Federal Housing Finance Agency, which has sued Barclays over the purchase of $4.9 billion in mortgage-backed securities.

But the judge said the lawsuit could move forward under other claims, including federal securities law violations.

Both Stefanie Johnson, a spokeswoman for the FHFA, and Brandon Ashcraft, a spokesman for Barclays, declined to comment.

The case is one of 18 the FHFA, as conservator of Fannie and Freddie, filed last year against various banks over purchases of subprime and other residential-mortgage-backed securities.

Cote presides over 16 of the lawsuits. She previously declined to dismiss cases against Goldman Sachs Group Inc (GS.N), Deutsche Bank AG (DBKGn.DE), Bank of America Corp's (BAC.N) Merrill Lynch unit, JPMorgan Chase & Co (JPM.N) and UBS AG (UBSN.VX).

Many of Barclays' arguments to dismiss the case were similar to those by other banks. But Cote said Barclays had presented one argument not previously addressed in her decisions.

Barclays had argued that a Barclays-owned entity and individual defendants couldn't be held liable under the Virginia Securities Act for misstatements about securities they didn't themselves sell to Fannie and Freddie.

Cote agreed, finding that Virginia had sought to ensure that liability under its securities law was more limited than under federal law.

The case is Federal Housing Finance Agency v. Barclays Bank PLC, U.S. District Court, Southern District of New York, 11-cv-06190.

(Reporting by Nate Raymond; Editing by Ciro Scotti)

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