A U.S. District judge decided that investment company Bank of New York Mellon must face a mortgage-related lawsuit filed by German lender Commerzbank, Reuters reported on Tuesday.
Commerzbank is suing BNY Mellon after mortgage-backed securities it bought before the 2008 recession went sour, resulting in a loss of more than $1 billion.
The German company is claiming BNY Mellon was negligent in its role as a trustee, as it “sat idly” over the years, causing the losses to grow bigger. BNY Mellon served as a trustee for 72 residential mortgage trusts and a collateralized debt obligation, backed by mortgages from lenders like Countrywide and NovaStar Mortgage.
The court ruled that Commerzbank could sue for “breach of contract and negligence claims, as well as a claim that Bank of New York Mellon violated the federal Trust Indenture Act.”
The lawsuit was filed in December 2015. Commerzbank also sued Deutsche Bank, HSBC Holdings and Wells Fargo at the same time, and those lawsuits remain active.
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