WALLSTREET TAMPERING WITH LIBOR COSTS HOMEOWNERS

 Add one more to the list of alleged victims of Libor manipulation: homeowners.

A class action complaint filed earlier this month in New York federal court claims borrowers with adjustable-rate mortgages based on the London Interbank Offered Rate, or Libor, paid more than they rightfully should have due to the rate's manipulation by the global banks involved in setting it.   

The complaint follows other class action suits filed by groups ranging from local governments to community banks to individual investors, all of whom say they lost out due to Libor-rigging.

Libor burst into the public consciousness this summer when British banking giant Barclays (BCS) admitted to manipulating it, reaching a $453 million settlement with U.S. and U.K. regulators. Other banks involved in setting Libor, including JPMorgan (JPM, Fortune 500), UBS (UBS), Citigroup (C, Fortune 500) and HSBC (HBC), have revealed that they too are cooperating with investigations on the issue, and additional settlements are expected.

The London Interbank Offered Rate is actually a collection of rates generated for 10 currencies across 15 different time periods, ranging from one day to one year. It's designed to measure the cost of borrowing between the world's largest banks, generating rates that are used as benchmarks for roughly $10 trillion in loans and some $350 trillion in derivatives. For example, an adjustable-rate mortgage might require you to pay interest based on a given Libor rate plus 2%.

Libor rates are set each business day through a process overseen by the British Bankers' Association. Groups of banks are asked what interest rate they would have to pay to borrow money for a certain period of time and in a certain currency. The responses are collected by Thomson Reuters, which removes a certain percentage of the highest and lowest figures before calculating the averages and creating the Libor quotes.

The homeowners' lawsuit alleges that the banks that set the six-month, U.S.-dollar version of Libor consistently pushed it upward on the first business day of each month between 2000 and 2009. Those are the days on which adjustable-rate mortgages "reset," generating a new value for the variable rate borrowers pay based on the current Libor value.

With Libor rates pushed higher on these dates, the suit says, homeowners ended up paying more than they should have.