Big bank to face lawsuits over $34 billion in mortgage bond losses

by 01 Jun 2015
A major bank will have to face three lawsuits accusing it of failing in its duties as a trustee for mortgage-backed securities that lost more than $34 billion in the global financial crisis.

U.S. District Judge Shira Scheindlin said today that HSBC would have to face lawsuits accusing it of brach of contract and concealing defects in mortgages underlying 283 trusts, according to a Reuters report.

“Based on plaintiff’s detailed allegations, it is indeed plausible to infer that HSBC had actual knowledge of breaches in representations and warranties in the specific loans at issue,” Scheindlin wrote in her decision. “How HSBC gained this actual knowledge, or whether in fact it had actual knowledge, may be determined through discovery.”

Scheindlin also ruled that the plaintiffs could pursue a conflict of interest claim. In that claim, Reuters reported. The plaintiffs allege that HSBC refused to disclose misconduct by loan servicers in the hopes that they would “return the favor when the roles were reversed.”

The judge did dismiss some claims, including negligence and negligent misrepresentation.


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