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BNY Mellon (BK) Wins Dismissal of Most of Commerzbank Lawsuit
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Most of the lawsuit filed by Commerzbank against The Bank of New York Mellon Corporation (BK - Free Report) related to toxic residential mortgage-backed securities (“RMBS”) has been dismissed. The news was first reported by Reuters.
U.S. District Judge, George Daniels, in Manhattan dismissed most of the lawsuit filed by Commerzbank, alleging that BNY Mellon was responsible for more than $1 billion in losses on toxic mortgages purchased before the 2008 global financial crisis.
The judge dismissed Commerzbank’s claims on all but 13 of the 100 certificates and notes it bought. He also rejected all negligence claims against BNY Mellon, which had served as trustee.
Commerzbank, in its December 2015 complaint, alleged that BNY Mellon was sitting idle even when losses piled up. Per Commerzbank, BNY Mellon should have forced lenders to buy back and servicers to address troubled loans.
The securities had been issued from 72 RMBS trusts and a collateralized debt obligation backed by home loans from Countrywide, NovaStar and other lenders.
While dismissing most of the lawsuit, Judge Daniels said that Commerzbank lacked standing to sue more than 76 securities because it sold them before taking legal action. Also, the company waited too long under German law to sue more than 11 other certificates.
The Judge also said that recent rulings, which include a decision by New York state’s Court of Appeals, required the rejection of Commerzbank’s negligence claims because they duplicated its breach-of-contract claims.
Over the past three months, shares of BNY Mellon have gained 8.7% compared with the industry’s growth of 2.8%.
Before and after the 2008 financial crisis, investors suffered huge losses on the RMBS they once considered safe. Thus, for more than a decade, various lawsuits have been filed against lenders, servicers and trustees.
Notably, the trustees handle back-office work after securities are sold and ensure that investors get their payments.
Trustees have been saying that their contracts safeguarded them from liability for RMBS losses and that sophisticated investors should have been aware of the risks.
Nomura Holdings, Inc. (NMR - Free Report) agreed to pay $35 million as part of a non-prosecution agreement with the federal government over criminal fraud relating to the trading of RMBS.
The traders at Nomura had been accused of overstating prices of MBS, which were demanded by sellers from 2009 to 2013, and keeping the difference.
Further, the traders had been held responsible for charging extra unearned commissions from their customers by negotiating prices for the bonds that NMR had already purchased.
UBS Group AG (UBS - Free Report) arrived at a settlement with the U.S. Department of Justice (“DOJ”) to pay $1.44 billion as a penalty to resolve a long-running civil case. The civil action against UBS was filed in 2018, alleging misconduct with regard to the underwriting, issuance and sale of RMBS that were issued in 2006-2007.
UBS said that the entire settlement was provisioned in the prior periods.
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BNY Mellon (BK) Wins Dismissal of Most of Commerzbank Lawsuit
Most of the lawsuit filed by Commerzbank against The Bank of New York Mellon Corporation (BK - Free Report) related to toxic residential mortgage-backed securities (“RMBS”) has been dismissed. The news was first reported by Reuters.
U.S. District Judge, George Daniels, in Manhattan dismissed most of the lawsuit filed by Commerzbank, alleging that BNY Mellon was responsible for more than $1 billion in losses on toxic mortgages purchased before the 2008 global financial crisis.
The judge dismissed Commerzbank’s claims on all but 13 of the 100 certificates and notes it bought. He also rejected all negligence claims against BNY Mellon, which had served as trustee.
Commerzbank, in its December 2015 complaint, alleged that BNY Mellon was sitting idle even when losses piled up. Per Commerzbank, BNY Mellon should have forced lenders to buy back and servicers to address troubled loans.
The securities had been issued from 72 RMBS trusts and a collateralized debt obligation backed by home loans from Countrywide, NovaStar and other lenders.
While dismissing most of the lawsuit, Judge Daniels said that Commerzbank lacked standing to sue more than 76 securities because it sold them before taking legal action. Also, the company waited too long under German law to sue more than 11 other certificates.
The Judge also said that recent rulings, which include a decision by New York state’s Court of Appeals, required the rejection of Commerzbank’s negligence claims because they duplicated its breach-of-contract claims.
Over the past three months, shares of BNY Mellon have gained 8.7% compared with the industry’s growth of 2.8%.
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Currently, BNY Mellon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Before and after the 2008 financial crisis, investors suffered huge losses on the RMBS they once considered safe. Thus, for more than a decade, various lawsuits have been filed against lenders, servicers and trustees.
Notably, the trustees handle back-office work after securities are sold and ensure that investors get their payments.
Trustees have been saying that their contracts safeguarded them from liability for RMBS losses and that sophisticated investors should have been aware of the risks.
Nomura Holdings, Inc. (NMR - Free Report) agreed to pay $35 million as part of a non-prosecution agreement with the federal government over criminal fraud relating to the trading of RMBS.
The traders at Nomura had been accused of overstating prices of MBS, which were demanded by sellers from 2009 to 2013, and keeping the difference.
Further, the traders had been held responsible for charging extra unearned commissions from their customers by negotiating prices for the bonds that NMR had already purchased.
UBS Group AG (UBS - Free Report) arrived at a settlement with the U.S. Department of Justice (“DOJ”) to pay $1.44 billion as a penalty to resolve a long-running civil case. The civil action against UBS was filed in 2018, alleging misconduct with regard to the underwriting, issuance and sale of RMBS that were issued in 2006-2007.
UBS said that the entire settlement was provisioned in the prior periods.