Twenty-three former Washington Mutual employees and several of the defunct thrift's subsidiaries have been sued by the federal government as part of its mortgage-securities lawsuit against JPMorgan Chase.

The suit, filed last week by the agency that now controls Fannie Mae and Freddie Mac, accuses those individuals of signing off on documents containing false or misleading information that were used to sell billions of dollars' worth of mortgage-backed securities.

The suit also goes into great detail about how WaMu and its subprime unit, Long Beach Mortgage, allegedly misrepresented specific securities and how those securities ultimately fared.

In one case, WaMu said none of the mortgages bundled into a particular security were for more than the actual value of the property, but government analysis indicated that in fact nearly 20 percent were, according to the suit.

The offering papers for that same security claimed that less than 10 percent of the underlying mortgages were on nonowner-occupied houses, which were considered to be at greater risk of default. The real figure, the government estimates, was nearly 20 percent.

Fannie and Freddie, the two giant government-sponsored mortgage-finance companies, bought $12.9 billion of WaMu and Long Beach securities between September 2005 and June 2007, according to the suit.

The JPMorgan Chase case, filed in federal court in Manhattan, is one of 17 brought last week by the Federal Housing Finance Agency, Fannie and Freddie's overseer, against big banks that assembled and sold mortgage-backed securities at the peak of the housing bubble.

The WaMu and Long Beach securities are included in the JPMorgan suit because that company acquired substantially all of WaMu's banking assets and liabilities nearly three years ago.

The former WaMu and Long Beach officials named in the suit were, in most cases, midlevel executives. The only senior executives included are Thomas Casey, former chief financial officer, and Craig Davis, former head of the Home Loans group.

None of the defendants has formally responded to the suit yet.

The suit claims that Fannie and Freddie relied on the prospectuses, registration statements and other documents filed by WaMu and Long Beach for each of the 35 separate issues of securities they bought during the boom.

But, according to the suit, those documents contained "materially false or misleading statements and omissions" and "falsely represented that the underlying mortgage loans complied with certain underwriting guidelines and standards, including representations that significantly overstated the ability of borrowers to repay their mortgage loans."

In February 2006, for instance, Freddie Mac bought $870.7 million of a Long Beach security known as LBMLT 2006-1. For a subprime instrument, Freddie's slice appeared pretty safe: It was rated AAA by Moody's and Standard & Poor's; according to the offering document nearly 73 percent of the underlying mortgages had loan-to-value (LTV) ratios of 80 percent or lower; none had LTV ratios greater than 100 percent; and less than a quarter were on non-owner-occupied houses.

LTV ratios compare the amount of the mortgage against the value of the property securing it; the lower the ratio, the safer the mortgage was considered for investors.

However, the government claims — based on evidence uncovered in several previous WaMu investigations — that the company pressured appraisers to inflate property values in order to lower LTV ratios.

It analyzed a sample of the underlying loans in LBMLT 2006-1, estimating the actual value of the properties at the time the loans were made, and concluded that only half of them had LTV ratios of 80 percent or lower. More than 11 percent of the loans, in fact, were for more than the estimated true property value.

Similarly, because borrowers were considered more likely to default on houses that weren't their primary residences, the lower the nonowner-occupied percentage was the more attractive the security appeared. But the government estimates that nearly a third of the loans in LBMLT 2006-1 were on nonowner occupied homes.

Far from being safe, nearly 56 percent of the mortgages in LBMLT 2006-1 have defaulted, are delinquent or are in foreclosure, according to the suit.

Drew DeSilver: 206-464-3145