Bank of New York Mellon Must Face $1.12B RMBS Lawsuit

U.S. District Judge Judge Gregory Woods in Manhattan says that Bank of New York Mellon Corp. (BK) must face a residential mortgage-backed securities fraud lawsuit holding the bank liable for $1.12B of investor losses. Royal Park Investments SA/NV, which is a Belgian investment fund, may now proceed with its claims, including those alleging breach of trust, breach of contract, and Federal Trust Indenture Act violations.

In its case against BNY Mellon, Royal Park wants class action status for other investors. It claims that its RMBS in the trusts at issue are now “”completely worthless.”

The investment fund contends that BNY Mellon, in its role of trustee for five trusts, disregarded the abuse occurring in the way the underlying loans were serviced and underwritten and did not mandate that bad loans be bought back. Royal Park believes that BNY Mellon breached its obligations out of fear it would lose business or make other financial service companies angry.

Over the past year, the investment fund has been allowed to pursue similar cases against HSBC Holdings Plc. (HSBC) And Deutsche Bank AG (DB). In the investment fund’s case against Deutsche Bank. U.S. District Judge Alison J. Nathan in New York recently denied the bank’s bid to get the proposed class action over $3.1B in RMBS losses dismissed. She did, however, dismiss derivative claims. Royal Park claims that Deutsche Bank knew by April 2011 that loans involved were highly defective but refused to force loan sellers to buy back the loans or replace them when it became clear that the mortgages backing the bonds were defaulting. Nathan also said that the plaintiffs detailed claims of significant losses, high default rates, and widespread probes into RMBS securitization were sufficient that the court was able to draw “reasonable inference” that loan guarantees had been breached.

It was just in August when the Federal Deposit Insurance Corp. also sued BNY Mellon in an RMBS. The regulator filed the case, serving as receiver for the Guaranty Bank of Texas, which purportedly suffered over $440M losses when it sold the securities that it bought from BNY Mellon. That case involves a dozen mortgage-backed trusts that were issued by Countrywide Home Loans Inc., which now belongs to Bank of America Corp. (BAC), and Bear Stearns Cos’ EMC Mortgage Corp unit. JPMorgan & Chase (JPM) has since purchased Bear.

The FDIC accused BNY Mellon of disregarding its obligation to make sure loan documents involved were not defective or incomplete. Instead, contends the regulator, BNY Mellon allowed sponsors to keep faulty mortgage loans in covered trusts while making excessive fees for servicing the loans that defaulted from said trusts. Meantime, Guaranty Bank sustained losses.

Our mortgage-backed securities fraud lawyers are here to help investors recoup their losses. The SSEK Partners Group works with high net worth individual investors and institutional investors. Our MBS fraud lawyers also represents retail investors. Contact us today to request your free case consultation.

Bank of NY Mellon must face lawsuit over $1.12 billion mortgage loss, Reuters, March 3, 2016

FDIC Sues Bank of NY Mellon, Citigroup, and US Bancorp for soured RMBSs Purchased by Guaranty Bank, Institutional Investor Securities Blog, August 27, 2015

Royal Park’s $3.1B Deutsche Bank RMBS Suit Mostly Survives, Law360, February 3, 2016