European Banks Sue Countrywide and Merrill Lynch Over Toxic Mortgage-Backed Securities
European Banks Sue Countrywide and Merrill Lynch Over Toxic Mortgage-Backed Securities
(CN) - In seperate complaints, two European banks claim in New York Supreme Court that Merrill Lynch and Countrywide duped them into investing hundreds of millions of dollars in mortgage-backed securities.
Dexia SA/NV of Belgium sued Merrill Lynch and Landesbank Baden-Wurttemberg of Germany named Countrywide as a defendant.
Dexia alleges that Merrill Lynch misled the institution about $527 million worth of residential mortgage-backed securities, while Landesbank claims Countrywide misled it about $455 million worth of RMBS.
Merrill Lynch claimed it investigated both the mortgage lenders and the loan applicants before packaging the loans into the now infamously toxic financial products.
"In truth, and as Dexia and the world would only later discover, the originators whose loans collateralized the Merrill Lynch RMBS at issue were among the worst of the worst culprits in the subprime lending industry. These originators have since folded up their operations, filed for bankruptcy or been shut down by regulators, and are the subject of numerous governmental investigations and private lawsuits alleging misconduct arising out of pervasive illegal and improper mortgage lending practices and other violations of law," the lawsuit states."Merrill Lynch learned that the originators routinely and flagrantly disregarded their own underwriting guidelines, originated loans based on wildly inflated appraisal values, and manipulated the underwriting process in order to issue to borrowers loans who had no plausible means to repay them,"
Landesbank Baden-Wurttemberg's lawsuit involves $455 million worth of bad RMBS sold by Countrywide, touted by the company as sound investments with AAA ratings.
"As (Landesbank Baden-Wurttemberg) would only later discover, the originators of those loans . . . were among the worst culprits in the subprime industry," the complaint reads. "Countrywide also knowingly provided false information to the credit rating agencies to secure an investment grade rating for its RMBS."
Both plaintiffs claim in their complaints that because of the astounding loan default rates and massive downgrades of the certificates, which are all now considered "junk," the companies investments are no longer marketable. The lawsuits name Merill Lynch, Countrywide and a host of subsidiaries and corporate officers.
The lawsuits were filed by Gerald H. Silk, Avi Josefson and Ross Shikowitz of Bernstein Litowitz Berger & Grossmann LLP of New York.
Dexia SA/NV of Belgium sued Merrill Lynch and Landesbank Baden-Wurttemberg of Germany named Countrywide as a defendant.
Dexia alleges that Merrill Lynch misled the institution about $527 million worth of residential mortgage-backed securities, while Landesbank claims Countrywide misled it about $455 million worth of RMBS.
Merrill Lynch claimed it investigated both the mortgage lenders and the loan applicants before packaging the loans into the now infamously toxic financial products.
"In truth, and as Dexia and the world would only later discover, the originators whose loans collateralized the Merrill Lynch RMBS at issue were among the worst of the worst culprits in the subprime lending industry. These originators have since folded up their operations, filed for bankruptcy or been shut down by regulators, and are the subject of numerous governmental investigations and private lawsuits alleging misconduct arising out of pervasive illegal and improper mortgage lending practices and other violations of law," the lawsuit states."Merrill Lynch learned that the originators routinely and flagrantly disregarded their own underwriting guidelines, originated loans based on wildly inflated appraisal values, and manipulated the underwriting process in order to issue to borrowers loans who had no plausible means to repay them,"
Landesbank Baden-Wurttemberg's lawsuit involves $455 million worth of bad RMBS sold by Countrywide, touted by the company as sound investments with AAA ratings.
"As (Landesbank Baden-Wurttemberg) would only later discover, the originators of those loans . . . were among the worst culprits in the subprime industry," the complaint reads. "Countrywide also knowingly provided false information to the credit rating agencies to secure an investment grade rating for its RMBS."
Both plaintiffs claim in their complaints that because of the astounding loan default rates and massive downgrades of the certificates, which are all now considered "junk," the companies investments are no longer marketable. The lawsuits name Merill Lynch, Countrywide and a host of subsidiaries and corporate officers.
The lawsuits were filed by Gerald H. Silk, Avi Josefson and Ross Shikowitz of Bernstein Litowitz Berger & Grossmann LLP of New York.
Copyright Courthouse News Service 2012
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