FDIC Sues Bank of NY Mellon, Citigroup, and US Bancorp for soured RMBSs Purchased by Guaranty Bank

The Federal Deposit Insurance Corp. is suing Bank of New York Mellon Corp. (BK), Citigroup (C), and US Bancorp (USB) for residential mortgage-backed securities that were purchased by the former Guaranty Bank.

The Texas-based bank closed shop in 2009 and the FDIC, which is its receiver, arranged for its deposits to be taken on by BBVA Compass, a U.S. unit of Spanish institution Banco Bilbao Vizcaya Argentaria SA (BBVA.MC). The regulator estimated that the shutdown would cost its deposit insurance fund $3 billion.

The 12 mortgage-backed trusts involved in this RMBS lawsuit were issued by Countrywide Home Loans and Bear Stearns Cos’ (BSC) EMC Mortgage Corp unit. In 2008, JPMorgan Chase & Co. (JPM.N) purchased Bear Stearns while Bank of America Corp. (BAC) purchased Countrywide.

According to the FDIC, over $440 million in losses resulted from the over $2.06 billion of securities that Bank of New York Mellon sold to Guaranty Bank. The FDIC also said that bond trustee BNY Mellon did not fulfill its obligation to make sure that loan documents were not defective or incomplete. The regulator also contended complaint that sponsors kept faulty mortgage loans in the trust, and servicers made excessive fees as they worked on defaulted loans from the trusts.

In the case against US Bancorp, the FDIC reported over $55 million of losses on over $248 million of securities. It reported over $200 million when selling $420 million of Guaranty Bank’s securities that were purchased from Citigroup.

Our RMBS fraud lawsuits represents institutional investors and high net worth individual investors in recouping their losses resulting from financial fraud. Over the years, we at The SSEK Partners Group have helped thousands recover their investments.

FDIC sues Citigroup, 2 other banks over soured mortgage-backed securities, Reuters, August 20, 2015

Information for Guaranty Bank, Austin, TX, FDIC