Bank Stocks Lower as FHFA Lawsuits Will Start Flying Soon

Bank stocks are sharply lower Friday following reports the Federal Housing Finance Agency (FHFA) is planning to file a lawsuit against some of the nation's largest banks over sour mortgage securities.

The FHFA, the regulator for Fannie Mae and Freddie Mac, is seeking to recoup billions in losses. The lawsuit is expected to be filed in the coming days.

The FHFA filed its first suit versus UBS (NYSE: UBS) in July and is seeking $900 million in damages. A dozen or so other suits are now expected.

Stocks in the sector are weaker across the board. JPMorgan (NYSE: JPM) is down 3.6 percent, Wells Fargo (NYSE: WFC) is down 3.2 percent, Citigroup (NYSE: C) is down 3.5 percent, Goldman Sachs (NYSE: GS) is down 4.7 percent and Morgan Stanley is down 4.4 percent. Bank of America (NYSE: BAC) is much weaker - down 6.5 percent - as in addition to the new mortgage issue, the Fed is scrutinizing the company.

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