(Reuters) - Bank of America Corp (BAC.N) and U.S. Bancorp (USB.N) have been sued by a Chicago pension fund that said they failed to protect investors in their roles as trustees for mortgage-backed securities for Washington Mutual Inc.
Wednesday’s complaint was filed eight days after U.S. District Judge William Pauley in Manhattan let four pension funds pursue similar claims against Bank of New York Mellon Corp (BK.N) over its role as trustee for Countrywide Financial Corp mortgage debt.
A lawyer whose firm represents investors in both cases has said she believed Pauley’s “watershed” decision was the first to let mortgage-backed securities investors pursue claims against a trustee under the 1939 federal Trust Indenture Act.
In the latest case, also filed in Manhattan federal court, the Policemen’s Annuity and Benefit Fund of the City of Chicago accused Bank of America and successor trustee U.S. Bancorp of causing millions of dollars of losses by failing to properly oversee 41 Washington Mutual trusts backed by home loans.
Saying it invested in six of those trusts, the fund accused both banks of failing to take possession of loan files or ensuring they were complete, or requiring Washington Mutual to fix or buy back defective loans.
Lawrence Grayson, a Bank of America spokesman, declined immediate comment, saying the bank was reviewing the complaint.
U.S. Bancorp spokeswoman Teri Charest said the complaint “contains numerous misstatements and mischaracterizations of U.S. Bank’s role as trustee. Plaintiff freely admits that it did not even invest in most of the trusts about which it sues. We intend to vigorously defend the case.”
The Chicago fund was also a plaintiff in the Bank of New York Mellon case. Pauley allowed bondholders to pursue claims that the bank did not properly advise them that Countrywide had defaulted on some obligations. He nonetheless said bondholders may sue only on the basis of trusts in which they invested.
Bank of America bought Countrywide in July 2008. Less than three months later, Washington Mutual failed and most of its operations were bought by JPMorgan Chase & Co (JPM.N) in a transaction arranged by the FDIC.
The case is Policemen’s Annuity and Benefit Fund of the City of Chicago v. Bank of America NA et al, U.S. District Court, Southern District of New York, No. 12-02865.
Reporting By Jonathan Stempel; Additional reporting by Alison Frankel; editing by Jim Marshall