Wells Fargo Sued by Commerz Bank in Mortgage-Backed Securities Case

Commerzbank is suing Wells Fargo (WFC) for losses sustained on failed mortgage-backed securities (MBS). The German finance firm claims the California lending giant did not properly supervise MBS during the housing bubble, which Commerzbank argues, led to hundreds of millions of dollars in losses.

Commerzbank alleges that Wells Fargo caused it over $100 million in losses because of Wells Fargo’s purported lack of action. The German firm invested over $290 million in MBSs and Wells Fargo was the trustee of 19 of the MBSs. A lot of the securities were backed by mortgages from subprime lender Option One.

The German bank believes that Wells Fargo and other trustees should have ensured that the loans backing the securities satisfied certain standards, notified investors when loans defaulted, and forced mortgage lenders to compensate investors for the poor quality loans. Instead, Wells Fargo did not do any of these actions.

In a similar lawsuit filed by two of the largest money managers in the world, Pacific Investment Management Co. (PIMCO) and Blackrock (BLK) are suing Wells Fargo, Deutsche Bank (DB), and others. Given the financial background of the companies suing, lawyers for Wells Fargo said that investments firms’ sophisticated institutional investors should have taken more action to protect themselves rather than depending so much on trustees. The attorneys also said that these investors should have pursued the firms that either put out the faulty loans or packaged them into securities. The lawyers pointed out that trustees do not play a very big part in the MBS market and their duties are limited.

Commerzbank also recently filed complaints against BNY Mellon (BONY), Deutsche Bank, and HSBC (HSBC), which also served as securities trustees. BONY was trustee of over $1 billion in MBSs and $1.3 billion of investments linked to an investment in Millstone II that the German firm purchased. Commerzbank’s claims against Deutsche Bank are based on over $640 million in MBS. Its case against HSBC involves $204 million in mortgage-backed securities. Commerzbank said that the trustees neglected their duty to protect investors’ rights and failed to protect the collateral behind the CDO, resulting in the bank losing $750 million.

Our institutional investor fraud law firm represents clients throughout the U.S., as well as institutional investors and high net worth investors located abroad with mortgage-backed securities fraud claims and lawsuits against firms and financial representatives in this country. Contact The SSEK Partners Group today.

Commerzbank sues Wells Fargo over losses on mortgage-backed securities, Los Angeles Times, December 29, 2015

Commerzbank sues BNY Mellon, Wells Fargo, HSBC over mortgage losses, Reuters, December 24, 2015