Banks accused of defrauding homeowners by rigging Libor

Thousands of Americans could potentially be part of the class action, the suit says. Between 2005 and 2009 alone, national banks originated some 900,000 adjustable-rate mortgages indexed to Libor, according to the Office of the Comptroller of the Currency. The suit does not specify the damages it seeks, but says the defendant banks "earned hundreds of millions, if not billions, of dollars in wrongful profits" by defrauding homeowners. John Sharbrough, a lawyer for the plaintiffs, said the average borrower with a Libor-based mortgage paid about $300 extra per year as a result of the alleged conspiracy. Related: Banks face billions more in Libor losses Tracking the consequences: Barclays' settlement earlier this year exposed two kinds of Libor manipulation. The firm admitted that beginning in 2005, its traders colluded with colleagues and counterparts at other banks to move Libor rates both up and down, depending upon the day, to benefit their trading positions. The bank also admitted to lowballing its Libor submissions between 2007 and 2009, as the financial crisis gathered force, in order to appear stronger and more creditworthy to investors. Most of the lawsuits filed thus far have come from individuals and organizations with investments that rose and fell with Libor values -- effectively, creditors -- who say they lost money when the rates were suppressed during the financial crisis. In the homeowner case, however, it's borrowers who say they lost money, alleging that certain Libor rates were regularly inflated dating back to 2000. Sharbrough said there could be "a potential conflict" between the homeowners' complaint, which alleges that certain Libor rates were too high, and other suits alleging rates were too low, at least for the years 2007 to 2009. He added that he needed to study the issue further. Mark Zandi, chief economist at Moody's Analytics, said both creditors and borrowers could conceivably have been harmed by Libor manipulation. "It just depends on the rate environment and the timing," he said. Given the variety of financial products tied to different Libor rates, he added, "It's not surprising that you've got a blizzard of legal actions out of all this."