Some recently active lawsuits tied to alleged deceit in the sale of mortgage-backed securities have either added plaintiffs, dismissed defendants or consolidated. Plaintiffs in some cases are affiliated with defendants in others. Since many of issuers of the securities are out of business, plaintiffs are looking to hold other parties liable.
A claim by plaintiffs to hold JP Morgan Chase Bank, N.A., liable for MBS issued by Washington Mutual Bank was denied by the U.S. District Court for the Western District of Washington. The court had already granted a motion by WaMu’s receiver, the Federal Deposit Insurance Corp., to dismiss claims against it because the plaintiffs failed to exhaust the administrative claims process mandated by the Financial Institutions Reform, Recovery and Enforcement Act.
“Plaintiffs have not provided a cogent or reasoned theory of successor liability as to JPMC,” the ruling stated. “They have failed to show any valid reason why they should be permitted to file another amended complaint, where the proposed amendment is untimely and futile.”
But in another case filed in 2009 against the FDIC by Deutsche Bank National Trust Co. over WaMu MBS, the federal judge denied the FDIC’s request for a dismissal, according to Reuters. Deutsche alleges that the securitized loans weren’t underwritten based on WaMu’s stated standards.
DB Structured Products Inc. and Deutsche Bank Securities Inc. have been named as additional defendants in an amended complaint filed in U.S. District Court for the Southern District of New York against Deutsche Bank AG by the Department of Justice, the Wall Street Journal reported. That case, which Deutsche requested in July to be dismissed, alleges that Deutsche should have known that subsidiary MortgageIT Inc. had inadequate controls in place on loans insured by the Federal Housing Administration.
General Electric Co. said in a statement that it would “vigorously contest” the Federal Housing Finance Agency’s lawsuit alleging violations of securities laws, according to published reports. The $529 million in transactions at the center of the case were issued by subsidiary WMC Mortgage Corp. and have a $66 million in principal remaining.
GE disclosed in July 2007 that it planned to sell the unit. By that November, the company was down to dozens of employees and virtually out of business.
WMC, along with Barclays PLC-subsidiary EquiFirst Corp., were sued on Sept. 2 in U.S. District Court for the District of Minnesota by U.S. Bank, N.A., Bloomberg reported. The lawsuit followed an investigation by Recovco Mortgage Management LLC, an investor in MASTR Asset Backed Securities Trust 2006-HE3, that allegedly found misrepresentations in the roughly $305 million in remaining loans.
EquiFirst disclosed in February 2009 that it would cease all mortgages operations. EquiFirst claimed in 2007 that it was the 12th largest U.S. nonprime wholesaler.
Barclays is among defendants named in FHFA’s lawsuits.
Knights of Columbus expanded a lawsuit against The Bank of New York Mellon to include claims of breach of contract, breach of fiduciary duty, negligence, gross negligence, recklessness and unfair trade practices, Talcott Franklin P.C. announced. Bank of New York is the trustee on 18 trusts issued by Bank of America Corp.
Knights of Columbus alleges that the Bank of New York has not provided documents requested on the trusts.
“Instead, without consulting the Knights and without determining the value of the Knights’ claims, BNYM asserts that it settled the claims underlying the Knights’ suit, and then sought to compel the Knights to accept the result,” the news release stated.
Western and Southern Life Insurance Co. filed a lawsuit in Hamilton County Common Pleas Court against BofA over alleged misrepresentations on $134 million in MBS it invested in between 2006 and 2008, Zacks Equity Research reported. As alleged a similar lawsuit filed in April by Western and Southern against BofA over $225 million in MBS issued by Countrywide Financial Corp, the insurer claims the MBS were misrepresented.
The U.S. Judicial Panel on Multidistrict Litigation consolidated in California federal court on Aug. 15 eight actions against Countrywide Financial Corp. over low-quality MBS. The panel decided that each case against Countrywide involved common questions of fact over allegations that Countrywide misrepresented the quality of securitized loans originated between 2004 and 2007.
“We conclude that centralization of the eight Countrywide MBS cases in the Central District of California will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation by avoiding duplicative discovery and other pretrial proceedings on complex common factual issues,” the decision stated. “Centralization also will ensure that a single judge presides over these actions providing consistency, preventing conflicting rulings, and greatly reducing the duplicative expenditure of judicial resources that otherwise would be required to resolve common questions now pending in at least five federal district courts across the country.”
Thomson Reuters reported last month that U.S. District Judge Mariana ruled that Pfaelzer Stichting Pensioenfonds ABP waited too long to file fraud claims based on alleged misrepresentations on MBS issued by Countrywide. The judge cited a five-year statue of repose.
ProPublica, a consumer advocate new publication, claims that a new lawsuit filed by the state of Nevada against BofA targets virtually all aspects of the bank’s mortgage operations. “Most broadly, Nevada’s action signals that the banks’ problems with home mortgages — the main cause of the financial crisis — continue to burden them and rattle investors,” ProPublica wrote. The publication suggests that the lawsuit “could have repercussions far beyond Nevada’s borders” and jeopardizes the settlement with state attorneys general.
A lawsuit filed last month by Allstate Corp. in New York State Supreme Court against Goldman Sachs Group Inc. alleges deceit by the investment banker in the sale of $123 million in MBS, Reuters reported. Citing a U.S. Senate report, Allstate claims that Goldman underwrote MBS with poor quality loans then bet against them.
IN RE WASHINGTON MUTUAL MORTGAGE BACKED SECURITIES LITIGATION.
Case No. C09-37 MJP (U.S. District Court for the Western District of Washington).
Deutsche Bank National Trust Co v Federal Deposit Insurance Corp et al.
Case No. 09-1656, 2009 (U.S. District Court for the District of Columbia.)
FEDERAL HOUSING FINANCE AGENCY, AS CONSERVATOR FOR THE FEDERAL HOME LOAN MORTGAGE CORPORATION, Plaintiff, -against- GENERAL ELECTRIC COMPANY; GENERAL ELECTRIC CAPITAL SERVICES, INC. d/b/a GE CONSUMER FINANCE or GE MONEY; GE MORTGAGE HOLDING, L.L.C., GE-WMC SECURITIES, L.L.C., MORGAN STANLEY & CO., INC., and CREDIT SUISSE SECURITIES (USA) LLC f/k/a CREDIT SUISSE FIRST BOSTON LLC, Defendants.
Sept. 2, 2011 (Supreme Court of the State of New York County of New York).
In re. MASTR Asset Backed Securities Trust 2006-HE3.
Case No. 11-02542, Sept. 2, 2011 (U.S. District Court for the District of Minnesota).
FEDERAL HOUSING FINANCE AGENCY, AS CONSERVATOR FOR THE FEDERAL NATIONAL MORTGAGE ASSOCIATION AND THE FEDERAL HOME LOAN MORTGAGE CORPORATION, Plaintiff, -against- BARCLAYS BANK PLC; BARCLAYS CAPITAL INC.; SECURITIZED ASSET BACKED RECEIVABLES LLC; MICHAEL WADE; JOHN CARROLL; and PAUL MENEFEE, Defendants.
Sept. 2, 2011 (U.S. District Court for the Southern District of New York).
Knights of Columbus, Plaintiff, v. The Bank of New York Mellon, Defendant.
Index No. 651442/2011 (Supreme Court of the State of New York County of New York).
IN RE: COUNTRYWIDE FINANCIAL CORP. MORTGAGE-BACKED SECURITIES LITIGATION.
MDL No. 2265, Aug. 15, 2011 (United States Judicial Panel on Multidistrict Litigation).
State of Nevada, Plaintiffs, vs. Bank of America Corporation; Bank of America, N.A.; BAC Home Loans Servicing LP, Recontrust Company, N.A.; Countrywide Financial Corporation; Countrywide Home Loans Inc.; and Full Spectrum Lending Inc.,; Defendants.
Case No. 3:11-cv-00135-RCJ (RAM) (U.S. District Court for the District of Nevada).
Allstate Insurance Co et al v. Goldman Sachs & Co et al.
Case No. 652273/2011 (New York State Supreme Court, New York County).
