DailyMail 2012 Oct 15

  • 65-year-old pensioner who lost her home leads charge over ‘unjust enrichment’ between 2000 and 2009
  • Lawsuit claims the Libor rate rose ‘artificially’ on the first day of the month – the days when many mortgage rates are calculated
  • Barclays, RBS, Lloyds and Bank of America all named in class-action lawsuit

A 65-year-old American woman who lost her home in the credit crunch is leading a class-action suit against 12 of the world’s major banks for their part in the financial crisis.
Annie Bell Adams claims banks including Barclays, RBS and Lloyds, manipulated the Libor rates to make mortgage repayments more expensive than they should have been.
The suit alleges the Libor – the rate at which banks lend to each other – was artificially changed at times when it would have a big impact on adjustable mortgage rates, ‘unjustly enriching’ the bankers at the cost of mortgage-holders losing their homes.

The class action lawsuit, originating in Alabama, alleges the rate-fixing meant homeowners paid thousands more than necessary between 2000 and 2009 – with the knock-on effect causing many families to lose their homes.
The group of 12 banks also includes UBS, Citigroup, The Bank of America, Rabobank International Holdings BV, Credit Suisse Group AG, HSBC Holdings, Lloyds Banking Group, Deutsche Bank AG and the Royal Bank of Canada.

Libor, or the ‘London interbank offered rate’, is seen as the benchmark for more than $300trillion of loans and securities, and is re-calculated on a daily basis, based on groups of lenders estimating their borrowing rates.
But the suit alleges this rate was artificially changed at times when it would have a big impact on adjustable mortgage rates.
This allowed them to increase the payments by homeowners on adjustable rate loans, boosting profit, according to the lawsuit.

Barclays Plc, Britain’s second-biggest lender by assets, is the only bank to have settled with regulators over the rigging of Libor.
It is the first class-action lawsuit filed by home owners, according to the Financial Times, which said other class-action suits have been brought by investors and municipalities.
Annie Bell Adams’s sub-prime mortgage was securitised into Libor-based collateralised debt obligations and sold on by banks to investors.
The plaintiffs, who have lost thousands of dollars each, could number 100,000, their Alabama-based attorney John Sharbrough said.
There are at least 900,000 homes in the UK with loans linked to Libor, with an unpaid principle balance of more than $275billion.
Sharborough declined to give a figure on the total damages his clients are seeking.

The lawsuit claims that increasing Libor allowed banks ‘to raise the interest rates paid by the plaintiffs on their adjustable-rate notes’
It says that many adjustable-rate mortgages had the first day of the month as a ‘change date’ on which new repayment rates would reset, it adds.
The FT adds that the lawsuit claims, upon statistical analysis, that Libor rose consistently on the first day of each month between 2000 and 2009.
It claims that, between 2007 and 2009, Libor moved as much as 7.5 basis points for certain certain reset days.
Faith in the Libor interest rate system, which underpins more than $300 trillion of contracts and loans from US mortgages to Japanese interest-rate swaps, plummeted after Barclays was fined in June for rigging it.
Other banks are under investigation.