More NewsBlackRock, Pimco sue Deutsche Bank and US Bancorp over Mortgage Securities

BlackRock, Pimco sue Deutsche Bank and US Bancorp over Mortgage Securities

Institutional investors led by BlackRock and Pacific Investment Management Co (Pimco) are suing units of six banks including Deutsche Bank and US Bancorp in a bid to recoup losses incurred on mortgage-backed securities.

The lawsuits, filed in New York state court and focusing on more than 2,000 mortgage bonds issued between 2004 and 2008, allege that the units of US Bank, Citibank, Deutsche Bank, Wells Fargo, HSBC and Bank of New York Mellon breached their duties to investors as trustees overseeing more than US$2 trillion in bonds.

The investors are seeking damages for losses on the bonds that have surpassed US$250bn, according to reports. The lawsuits by BlackRock and Pimco funds claim the banks breached their duty to bondholders by failing to force lenders and bond issuers to repurchase loans that fell short of the quality standards described to buyers when the securities were sold.

The wording of the complaint against Citibank states that trustees were aware of an “industry-wide abandonment of underwriting guidelines” for the loans and “pervasive and systemic deficiencies infecting the trusts’ collateral”.

The lawsuits follow a New York appeals court ruling last December that determined the six-year statute of limitations to bring breach of contract cases against the issuers of mortgage securities began when the transactions were executed. The ruling means that for many cases it is too late to sue. Bondholders have retorted that the limitation should begin when a repurchase demand is made.

Comments are closed.

Subscribe to get your daily business insights

Whitepapers & Resources

2021 Transaction Banking Services Survey
Banking

2021 Transaction Banking Services Survey

2y
CGI Transaction Banking Survey 2020

CGI Transaction Banking Survey 2020

4y
TIS Sanction Screening Survey Report
Payments

TIS Sanction Screening Survey Report

5y
Enhancing your strategic position: Digitalization in Treasury
Payments

Enhancing your strategic position: Digitalization in Treasury

5y
Netting: An Immersive Guide to Global Reconciliation

Netting: An Immersive Guide to Global Reconciliation

5y