U.S. may sue over bad mortgages

Rumours are swirling that the U.S. government is preparing to sue some of the country’s biggest mortgage providers over bad mortgage packages.

Richard Bove, an analyst at Rochdale Securities, notes that establishing the precedent that anyone can sue a lender if a mortgage doesn’t work out could create a nightmare for the courts.

Like government suits against the tobacco, he says, the precedent could kick off a never ending string of lawsuits. And if settlements on suits pull excessive cash out of U.S. banks, it could in theory jeopardise the banking system’s overall stability.

• Watch : Bove Says Mortgage Lawsuits Could Crash Banking System