Bank of NY Mellon sued for $2.06bn over residential mortgages
This is a commercialbankingreview.com article.
The US Federal Deposit Insurance (FDIC) has sued the Bank of New York Mellon (BNY) for $2.06bn over residential mortgage-backed securities bought by a failed Texas bank.
The Guaranty Bank which closed in August 2009 had accused BNY Mellon of failing to protect the interest of its investors.
According to the complaint filing by FDIC that sued in its capacity as receiver for the failed bank, Guaranty had suffered losses of over $440m after selling the securities in March 2010.
Reuters quoted the lawsuit as saying: “While BNY Mellon stood idly for years, the sponsors kept defective mortgage loans in the covered trusts, servicers reaped excessive fees for servicing the defaulted loans from the covered trusts, and plaintiff was left to suffer enormous losses.”
FDIC further stated that being the bond trustee, BNY Mellon ‘shirked its duty’ to make sure that the loan documents were incomplete or faulty.
The regulator had also filed another lawsuit against US Bancorp earlier related to more than $248m of mortgage debt bought by Guaranty that resulted in losses when it was sold.
Spokespersons from both BNY Mellon and US Bancorp declined to comment on the development.
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