Commerzbank AG (CRZBY)

[Enterprising Investor]

Commerzbank Sues Banks in U.S. Over Mortgage-Backed Securities Losses (12/28/15)

Claims banks failed to properly monitor losses on securities for which they acted as trustees

By Madeleine Nissen and Ulrike Dauer

German lender Commerzbank AG is suing four banks in the U.S. in an attempt to hold the banks accountable for almost $2 billion in losses related to mortgage-backed securities.

According to court documents viewed by The Wall Street Journal, the German bank claims that the four banks— Deutsche Bank AG ’s U.S. unit Deutsche Bank National Trust Co., Bank of New York Mellon Corp. Wells Fargo N.A. and HSBC Bank USA N.A.—failed to properly monitor losses on residential mortgage-backed securities for which they acted as trustees on behalf of Commerzbank.

In each of the four lawsuits, Commerzbank accuses the bank in question of breaching “contractual and fiduciary duties.”

Commerzbank bought these securities between 2005 and 2007; in the subsequent mortgage debt crisis, the investments lost virtually their entire value. Commerzbank is making a last attempt to secure the funds or some of the funds before the claims lapse.

The overall amount Commerzbank is trying to recoup from the four banks is almost $1.9 billion. Of this, Commerzbank claims it lost some $640 million when using Deutsche Bank National Trust as trustee for some of the securities. It pegs an even higher loss of $750 million incurred for securities entrusted to BNY Mellon. Commerzbank also claims $290 million from Wells Fargo and $204 million from HSBC Bank USA.

The four lawsuits were filed on Dec. 23 and Dec 24 in the U.S. District Court for the Southern District of New York.

A spokesman for Deutsche Bank declined to comment on the matter. Spokespeople for BNY Mellon, Wells Fargo and HSBC weren’t immediately available to comment.

For Deutsche Bank, Commerzbank’s crosstown neighbor in Frankfurt, Germany, the lawsuit comes at a bad time, as it tries to reduce number of legal disputes it is currently involved in—currently around 7,000.

The cases filed in the U.S. District Court, Southern District of New York, are Commerzbank AG v. The Bank of New York Mellon, No. 15-10029; Commerzbank AG v. Deutsche Bank National Trust Company, No. 15-10031; Commerzbank AG v. Wells Fargo Bank N.A., No. 15-10033; and Commerzbank AG v. HSBC Bank USA, National Association, No. 15-10032.

http://www.wsj.com/articles/commerzbank-sues-banks-in-u-s-over-mortgage-backed-securities-losses-1451314571