Six banks sued over trustee roles 

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A group of big investors including Blackrock and Pimco are suing six different banks including Deutsche Bank and HSBC for their role as trustees of mortgage-backed securities in the lead up to and during the financial crisis.

In six similarly-worded suits, filed on Wednesday at the Supreme Court in New York, the investors alleged that the banks – which also include Citigroup, Bank of New York Mellon, US Bancorp and Wells Fargo – ignored “pervasive” deficiencies in the underlying loan pools and the servicing of the loans.

Deutsche Bank, HSBC, Citi and Wells Fargo declined to comment. BNY Mellon and US Bancorp did not immediately respond.
Blackrock declined to comment and Pimco did not respond to a request.

Banks in the US have faced years of legal wrangling with both big investors and the government over their practices in the lead up to the financial crisis, costing them more than $100bn in fines, penalties and settlements.
But, the new focus of this investor group, which alleges billions of dollars in damages, is on whether these banks fulfilled their fiduciary duties on large pools of residential mortgage-backed securities between 2004 and 2008.
As trustees, the banks would be expected to protect the rights of investors by overseeing the enforcement of terms on these pools of mortgage-backed securities.

Investors can be protected by repurchase agreements that force lenders to buy back loans if the credit quality turns out to be worse than pledged when they were sold.
The suits were first reported by the Wall Street Journal earlier on Wednesday.
The other investors include Aegon, Brookfield, Kore, Prudential, Sealink and TIAA. The plaintiffs, represented by Bernstein Litowitz Berger & Grossmann did not respond to a request for comment.

A spokesman for Charles Schwab, confirmed that Schwab was party to the suit but declined to comment further. Prudential, TIAA-Cref and Brookfield both declined to comment. AEGON USA, and DZ Bank did not respond to requests for comment. Sealink, which has been party to similar suits in the past, could not be reached.
Blackrock and Pimco have teamed up alongside other big investors against the banks before, using the law firm Gibbs & Bruns, demanding billions of dollars from the likes of JPMorgan Chase and Bank of America. Those suits are ongoing.

 

Source: FT

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