Sunday, August 21, 2011

Investor Files Amended 'Securitization Screw-Up' Suit; Believes Bankster's Knowing Bungle In Mortgage File Exchange Led To Purchase Of 'Unbacked' MBS

In New York City, Bloomberg reports:

  • Bank of New York Mellon Corp., targeted by New York for allegedly violating state law while representing mortgage-bond investors, was accused by Knights of Columbus of damaging its investment in mortgage securities.

  • Knights of Columbus, a charitable organization that invested in mortgage-backed securities, seeks to recover losses and demands punitive damages from the bank, according to an amended complaint filed [Tuesday] in New York state court in Manhattan.

  • Bank of New York, which serves as trustee for trusts holding loans underlying mortgage securities, mismanaged the trust assets, Knights of Columbus said in a statement []. It accused the bank in the complaint of gross negligence and recklessness and said the bank’s actions caused a “substantial” loss.

  • It is apparent that the defendant knowingly failed in its obligation to receive, process, maintain, and hold all or part of the mortgage files,” Knights of Columbus, based in New Haven, Connecticut, said.

  • As a result, it didn’t acquire mortgage-backed securities, “but instead acquired securities backed by nothing at all,” the organization said.

  • Kevin Heine, a spokesman for Bank of New York, said the complaint “is without merit.”


  • Earlier this month, New York Attorney General Eric Schneiderman accused Bank of New York of misleading investors and violating state law in its role as trustee for bonds backed by Countrywide Financial Corp. loans. Schneiderman said Bank of New York knew of “loan documentation deficiencies.”

  • Countrywide’s failure to transfer complete mortgage loan documentation to the trusts hampered the ability of the trusts to foreclose on delinquent mortgages, impairing the value of the securities backed by the mortgages, Schneiderman said.

For the story, see Knights of Columbus File Amended Complaint in BNY Mortgage Security Case.

See also, The Wall Street Journal: Knights of Columbus Add New Claims To BNY Mellon Mortgage Suit (requires subscription; if no subscription, GO HERE - then click the appropriate link for the story).

For the amended lawsuit, see Knights of Columbus v. The Bank of New York Mellon.

Thanks to Deontos for the heads-up on the story.

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