Estimated read time: 1-2 minutes
TRENTON, N.J. (AP) - The state of New Jersey is accusing Credit Suisse Securities and two affiliates of misrepresenting the risks involved in the sale of more than $10 billion in residential mortgage-backed securities.
In a lawsuit filed Wednesday, the state said Credit Suisse did not disclose to investors that underwriting guidelines had been abandoned in the sales.
The suit, which is similar to one filed by New York last year, says investors were also not told that numerous loan originators had poor track records and that some had even been suspended from doing business with Credit Suisse.
The state alleges that one-fourth of the loans the firm examined were underwater, or were for more than the homes were worth. They were so risky that Credit Suisse's own traders would not hold them even as the company promoted them to outside investors.
"The kind of conduct described in this lawsuit is the kind of conduct that helped put the nation in financial crisis, with loan originators and investment banking firms abandoning prudent lending guidelines in order to generate quick profits," Acting Attorney General John Hoffman said in a statement. "Ultimately, it was consumers who suffered the harm caused by these reckless lending practices, and by the misrepresentations used to make these doomed investments seem attractive."
Credit Suisse spokesman Drew Benson says the complaint is without merit. "It recycles baseless claims and uses inaccurate and exaggerated figures," he said in a statement. "We look forward to presenting our defense in court."