The proposed settlement “would result in one of the largest federal class-action recoveries for investors in mortgage-backed securities,” said a statement from the law firm of Berman DeValerio, the law firm that represents the Wyoming offices, the lead plaintiffs in that case.

Under the Fraud Against Taxpayers Act, all information pertaining to the Virginia lawsuit was sealed until Tuesday, Herring said. The accused banks will now have the opportunity to respond and possible negotiate terms for a settlement.

“If the case is not settled, it would be one of the largest suits ever filed in a Virginia state court,” Tobias said.

Herring said that earlier this year, his office was tipped off by a whistle-blower — a company called Integra, a financial analysis and modeling firm in Texas, which matched the securities with the underlying mortgages and properties.

“We have been examining the evidence for months, and it clearly shows that these banks misrepresented these securities in order to entice the commonwealth into purchasing the investments,” Herring said.

In total, it is estimated that nearly 40 percent of the mortgages in the securities sold to Virginia were fraudulently misrepresented in a way that made them significantly higher risk of a default, Herring said.