MBS Litigation Ledger

JPMorgan Chase and affiliates, Bear Stearns and affiliates and Washington Mutual and affiliates have been named as defendants in multiple lawsuits in their various roles as issuers, sponsors or underwriters in MBS offerings, a Nov. 9 filing with the Securities and Exchange Commission by JPMorgan Chase & Co. indicated. Individual investors are named as plaintiffs in class actions, while insurance companies have also filed complaints. Offering documents on more than $150 billion in securities allegedly contain material misrepresentations.

Three purported class actions pending against JPMorgan and Bear for their roles as MBS issuer or underwriter were filed in U.S. District Court for the districts of Southern New York and Eastern New York. The New York-based company said it has moved to dismiss two of the actions — with a dismissal expected to be granted in one case.

Two consolidated purported class actions were filed in U.S. District Court for the Western District of Washington against WaMu affiliates, Washington Mutual Asset Acceptance Corp. and Washington Mutual Capital Corp. Chase, which acquired WaMu in September 2008, said that its “motion to dismiss was granted in part to dismiss all claims relating to MBS offerings in which a named plaintiff was not a purchaser. Discovery is ongoing.”

JPMorgan entities, several Bear entities and some WaMu affiliates are defendants in nine separate individual actions filed by the Federal Home Loan Banks of Pittsburgh, Seattle, San Francisco, Chicago and Indianapolis. Those cases were filed in various state courts around the country. In addition, JPMorgan, Bear and WaMu entities are also among the defendants named in separate individual actions commenced by Cambridge Place Investment Management Inc. in Massachusetts state court and by The Charles Schwab Corp. in state court in California.

JPMorgan subsidiary EMC Mortgage Corp. is a defendant in four pending lawsuits filed by bond insurers on $3.6 billion in EMC MBS. Three actions by Assured Guaranty Corp., Ambac Assurance Corp. and Syncora Guarantee Inc. are pending in U.S. District Court for the Southern District of New York. The other case was filed in a Texas state court by CIFG Assurance North America Inc.

Deutsche Bank National Trust Co. filed a complaint in U.S. District Court for the District of Columbia initially against the Federal Deposit Insurance Corp. accusing WaMu of an estimated $6 billion to $10 billion in damages because of alleged breaches of mortgage securitization agreements and alleged violation of representations and warranties. A response to the complaint was due on Nov. 22.

An announcement from Cohen Milstein Sellers & Toll PLLC indicated that the defendants’ motion to dismiss was denied by a judge in U.S. District Court for the Western District of Washington in Boilermakers National Annuity Trust Fund, et. al. v. WaMu Mortgage Pass Through Certificates, Series AR1, et. al. The $10.8 billion MBS lawsuit is Case No. 2:09-cv-00037-MJP.

Morgan Stanley warned in an SEC filing that it expects to face more litigation tied to residential mortgages and related securities as “the level of litigation activity focused on residential mortgage-related claims has increased materially in the financial services industry.”

One case being fought by Morgan Stanley is Case No. 09 Civ. 2137 in U.S. District Court for the Southern District of New York.

Banc of America Securities LLC; Asset Backed Funding Corp.; Banc of America Mortgage Securities Inc.; CSC; CWABS Inc.; CWALT Inc.; Merrill Lynch Pierce, Fenner and Smith Inc.; and Merrill Lynch Mortgage Investors Inc. are among the defendants in Cambridge Place Investment Management Inc. v. Morgan Stanley & Co. Inc., et al., Bank of America Corp. reported in an SEC filing. The case was filed on July 9 by Cambridge Place Investment Management Inc. in Massachusetts Superior Court, Middlesex County.

Charles Schwab sued Banc of America Securities, Bank of America Mortgage Securities Inc., Bank of America Funding Corp., Countrywide, CWALT Inc., MLPF&S and Merrill Lynch Mortgage Investors Inc. on July 15 in Superior Court California, County of San Francisco. The case is entitled The Charles Schwab Corporation v. BNP Paribas Securities Corp.

The Federal Home Loan Bank of Chicago filed a complaint on Oct. 15 in the Circuit Court of Cook County, Illinois County Department, Chancery Division against the Bank of America Corp., Banc of America Funding Corporation, Banc of America Securities, CSC and MLPF&S, among other defendants. The case, entitled Federal Home Loan Bank of Chicago v. Banc of America Funding Corp. et al., is tied various MBS offerings.

The FHLB Chicago filed a second complaint against several BofA entities on Oct. 15 entitled Federal Home Loan Bank of Chicago v. Banc of America Securities LLC et al., in the Superior Court of the State of California, County of Los Angeles, Northwest District.

A putative class action filed on Nov. 14, 2008, against Countrywide Financial Corp. was dismissed on Nov. 4 by the U.S. District Court for the Central District of California, BofA announced. In the case, Luther v. Countrywide Home Loans Servicing LP, et al., the “court ruled that the named plaintiffs in Maine State have standing to sue only over offerings of mortgage-backed securities in which they actually purchased, and that the statute of limitations would be tolled only for offerings in which the named plaintiffs in the Luther state court action, on which the Maine State plaintiffs rely for tolling purposes, had also purchased.”

BofA originally estimated that the amount of offerings at issue in the case were $352 billion but cut the estimate to $31 billion after the victory.

Before that, Countrywide won a dismissal of an MBS case filed by Quinn Emanuel Urquhart & Sullivan clients Footbridge Limited Trust and OHP Opportunity Trust in U.S. District Court for the Southern District of New York, The American Lawyer reported.

In late September, Ambac Assurance filed a lawsuit in New York State Supreme Court against BofA over $16.7 billion in allegedly misrepresented MBS issued by Countrywide between 2004 and 2006, Bloomberg reported. Ambac reportedly determined that 97 percent of the 6,533 mortgages it reviewed from 12 securitizations did not conform to the stated underwriting guidelines.

Earlier this year, New York State Supreme Court Justice Eileen Bransten granted MBIA’s request for discovery on around $20 billion in Countrywide loans, Reuters reported. Countrywide is accused of fraud and breach of good faith.

An earlier report from Bloomberg indicated that Bank of New York Mellon, as trustee for $26 billion in Countrywide MBS, would ignore a demand from bond investors to investigate possible repurchases on the securities.

In its own SEC filing, Citigroup Inc. said that it was hit with a barrage of MBS lawsuits beginning in July by several investors including Cambridge, Schwab FHLB Chicago and FHLB Indianapolis. Citi allegedly issued actionable misstatements or omissions. The docket numbers on the cases are 10 Civ. 11376 (D. Mass.) (Gorton, J.), 10 Civ. 4030 (N.D. Cal.) (Illston, J.), 10 CH 45033 (Ill. Cook County Cir. Ct.), LC 091499 (Cal. L.A. County Super. Ct.) and 10 PL 045071 (Ind. Marion County Super. Ct.).

Wells Fargo & Co. reported in an SEC filing that a dismissal was granted in part on Oct. 15 In Re Wells Fargo Mortgage-Backed Certificates Litigation and Related Mortgage Litigation and Investigations. That case was filed in U.S. District Court for the Northern District of California.

Wells also disclosed that it faced three other actions. Federal Home Loan Bank of Chicago v. Banc of America Funding Corporation, et al. was filed in the Cook County Circuit Court, State of Illinois, while Federal Home Loan Bank of Chicago v. Banc of America Securities LLC, et al. was filed in the Superior Court of the State of California for the County of Los Angeles. The third action, Federal Home Loan Bank of Indianapolis v. Banc of America Mortgage America Securities Inc., et al., was filed in the Superior Court of the State of Indiana for the County of Marion. Around $7.2 billion in securities are involved.

Wells’ request to dismiss General Retirement System of the City of Detroit v. The Wells Fargo Mortgage Backed Securities 2006-AR18 Trust, et al., Case No. 09-CV-1376-LHK, was granted by the U.S. District Court for the Northern District of California.

An application for the admission of attorney pro hac vice was granted in a order issued by a judge in U.S. District Court for the Northern District of California on Sept. 2 In Re. Wells Fargo Mortgage-Backed Certificates litigation.

In September, the SEC reported that it charged John P. Flannery and James D. Hopkins, former employees of State Street Bank and Trust Co., with misleading investors about their exposure to subprime MBS investments. State Street separately agreed to pay more than $300 million to investors who lost money during the subprime market meltdown in 2007 as part of a settlement with the SEC and the State of Massachusetts.

The Sixth Circuit U.S. Court of Appeals affirmed the dismissal of a lawsuit filed by the City of Cleveland against Ameriquest Mortgage Securities Inc. and several other Wall Street firms.

Ambac Assurance Corp. v. Countrywide Home Loans Inc.
Case No. 651612 (New York state Supreme Court).

In Re. Wells Fargo Mortgage-Backed Certificates.
Case No. 09-CV-01376-LHK (U.S. District Court for the Northern District of California).