When it comes to litigation filed on behalf of investors of mortgage-backed securities, much of the action is handled in state and federal courts located in New York City. Among recent actions in MBS cases was an appellate affirmation of the dismissal of a lawsuit filed against the three major ratings agencies.
On Dec. 3, the U.S. Court of Appeals for the Sixth Circuit upheld the U.S. District Court for the Southern District of Ohio’s dismissal of a lawsuit against Standard &Â Poor’s Financial Services LLC, Moody’s Investors Service Inc. and Fitch Inc. The complaint was filed by five Ohio pension funds that acquired hundreds of millions of dollars in AAA-rated MBS issued between 2005 2008. The plaintiffs claim that they lost $457 million.
Deutsche Bank AG was sued on Dec. 27 in New York’s supreme court by Landesbank Baden-Wurttemberg. The complaint says that Deutsche internally referred to RMBS as “generally horrible,” “pigs” and “crap” for more than two years while it created, issued and sold the same securities by presenting them as prudent, investment grade, primarily triple-A securities. The plaintiff purchased around $173 million of the deals.
“Deutsche Bank’s singularly negative view of these loans and the RMBS they backed, led it, starting as early as 2005, to bet against the U.S. housing market, ultimately developing a $10 billion ‘short’ position that paid off when the same loans backing the RMBS it sold to plaintiffs, their assignors and other investors failed,” the complaint states.
Another Deutsche unit, Deutsche Bank National Trust Co., has sued WMCÂ Mortgage LLC and General Electric Capital Corp. The complaint, filed last month in Connecticut District Court, alleges misrepresentation on more than $390 million in loans included in an MBS.
A federal judge in Minnesota on Oct. 1 granted WMC Mortgage Corp.’s motion to dismiss a lawsuit filed in September 2011 by U.S. Bank, N.A., as trustee for MASTR Asset Backed Securities Trust 2006-HE3. All claims against co-defendant EquiFirst Corp. were dismissed. U.S. Bank alleged that the defendants breached various representations and warranties because the origination practices used by the defendants did not comply with customary industry standards. But the judge agreed with the defendants’ contention that because the trust had liquidated the collateral securing certain of the loans, specific performance was not available to the trust.
Flagstar ABS LLC was sued in federal court in Manhattan by MBIAÂ Inc. over allegations that the bond insurer paid out $165 million in claims on MBS that Flagstar misrepresented, Bloomberg reported. The Flagstar Bancorp Inc. subsidiary has reportedly refused to honor repurchase demands on two securitizations issued is 2006 and 2007.
Closing arguments were presented in November in Assured Guaranty LTD’s lawsuit against Flagstar Bancorp Inc. Around $900 million in MBS were misrepresented by the Troy, Mich.-based company, according to the lawsuit, which seeks $116 million.
The Supreme Court of the State of New York was the venue for a complaint filed on Nov. 7 by Sealink Funding Limited against Citigroup Inc. and some of its subsidiaries. Sealink claims it was deceived about key statistical characteristics, underwriting standards and loan trust transfers in offering materials for around $513,331,000 in MBS it acquired.
Capital One, N.A., was sued on Oct. 24 in U.S. District Court for the Southern District of New York by Ambac Assurance Corp. The bond insurer alleges that Capital One, as successor to Chevy Chase Bank, F.S.B., breached certain representations and warranties in contracts relating to six Chevy Chase securitizations for $5.2 billion issued in 2006 and 2007.
A lawsuit filed in April 2012 by Prudential Insurance Company of America in New Jersey’s Essex County Superior Court against J.P. Morgan Securities LLC, EMCÂ Mortgage LLC and several other JPMorgan units was subsequently remanded to U.S. District Court for the District of New Jersey, according to a story from Courthouse News Service. However the lawsuit, which alleged that the defendants abandoned underwriting guidelines and knowingly lied, was remanded back to state court on Dec. 20.
An $11.5 million settlement was approved on Dec. 10 in a lawsuit filed by Genesee County Employees’ Retirement System in March 2009 against Credit Suisse Securities, RBS Securities, Greenwich Capital Acceptance and Structured Asset Mortgage Investments in U.S. District Court for the District of New Mexico, a report in The New Mexican said. The Maryland National Capital Park & Planning Commission Employees’ Retirement System and the Midwest Operating Engineers Pension Fund have become the lead plaintiffs in the case, which involves MBSÂ issued by bankrupt Thornburg Mortgage.
Woori Bank’s federal lawsuit against the Royal Bank of Scotland was dismissed on Dec. 27, Reuters reported. Woori alleged it was deceived into investing in $80 million in collateralized-debt obligations backed by risky MBS.
