| NEW YORK, June 18
NEW YORK, June 18 Institutional investors
including BlackRock Inc and Allianz SE's Pimco
on Wednesday sued six of the largest bond trustees, accusing
them of failing to properly oversee more than $2 trillion in
mortgage-backed securities issued in the run-up to the 2008
The lawsuits, filed in New York state court, claim the
trustees breached their duties to investors by failing to force
lenders and sponsors of the securities to repurchase defective
loans, the suits claim.
The investors are seeking damages for losses that exceed
$250 billion and relate to over 2,200 residential
mortgage-backed securities trusts issued between 2004 and 2008,
according to a person familiar with the cases.
The trustees that were sued include units of U.S. Bank
, Citibank, Deutsche Bank, Wells Fargo &
Co., HSBC, and Bank of New York Mellon.
Representatives for the banks declined comment or did not
immediately respond to requests for comment.
The lawsuits come after a New York appeals court ruling in
December that determined the six-year statute of limitations to
bring breach-of-contract cases against the issuers of mortgage
securities began when the transactions were executed. The ruling
means that for many cases it is too late to sue.
The lawsuits claim the trustees disregarded their duties to
protect investors despite knowing that the trusts held a large
number of loans that did not meet their contractual obligations.
The trustees were aware of an "industrywide abandonment of
underwriting guidelines" for the loans and "pervasive and
systemic deficiencies infecting the trusts' collateral," as the
complaint against Citibank says.
Banks have paid billions of dollars in lawsuits and
settlements since being accused of packaging shoddy mortgages
into securities that helped lead to the financial crisis.
The bonds at issue here have not been included in similar
cases including an $8.5 billion accord between investors and
Bank of America Corp and a $4.5 billion deal between
investors and JPMorgan Chase & Co over mortgage-backed
securities, the person familiar with the lawsuits said.
In addition to BlackRock and Pimco, the lawsuits were filed
on behalf of Charles Schwab Co, DZ Bank AG and other
The cases were filed on behalf of the investors by
Bernstein Litowitz Berger & Grossmann.
The cases are BlackRock Allocation Target Shares, et al v
Bank of New York Mellon, Blackrock Balanced Capital Portfolio,
et al, v Deutsche Bank National Trust Company, BlackRock
Allocation Target Shares v. U.S. Bank National Association;
BlackRock Balanced Capital Portfolio, et al v Citibank N.A.;
BlackRock Core Active Libor Fund B v HSBC Bank USA; and
BlackRock Allocation Target Shares et al, v Wells Fargo Bank,
New York State Supreme Court, New York County.
(Reporting by Karen Freifeld; Editing by Ken Wills)