HSBC Bank USA

Commerzbank AG Sues Four RMBS Trustees Alleging Violations of Duties to Investors

On December 23 and 24, Commerzbank AG filed four actions in the Southern District of New York against Deutsche Bank National Trust Company, HSBC Bank USA, N.A., Wells Fargo Bank, N.A., and the Bank of New York Mellon in their capacities as trustees for a number of RMBS trusts.  Commerzbank, as an RMBS investor, alleges that the trustees violated their contractual, fiduciary, and statutory duties by, among other things, failing to address servicers’ “looting” of the trusts.  Commerzbank further alleges that the trustees failed to act to defend the trusts’ interest against misconduct by sponsors and originators for the deals at issue.  The complaints in these actions are substantially similar, and closely parallel other RMBS cases alleging violations of the Trust Indenture Act and the Streit Act, as well as breach of contract, breach of fiduciary duty, negligence and breach of the covenant of good faith.  We have previously covered similar suits by the National Credit Union Administration and Pacific Investment Management Company. Representative Complaint.

Judge Scheindlin Denies Motion to Dismiss NCUA Claims

On July 20, 2015, Judge Scheindlin of United States District Court for the Southern District of New York denied HSBC Bank USA, NA’s (“HSBC”) motion to dismiss claims brought by the National Credit Union Administration (“NCUA”) related to the administration of mortgage-backed securities worth $2 billion.  NCUA alleges that HSBC failed to perform its duties as the indentured trustee for 37 RMBS trusts.  Judge Scheindlin rejected HSBC’s argument that NCUA lacked standing to bring the suit because most of the debt had been resecuritized, and held that NCUA has standing to pursue the claims against HSBC derivatively because the current trustee of the resecuritized loans tacitly consented to the action by remaining neutral.  Opinion and Order.

HSBC Motion to Dismiss Denied in Part in Trustee RMBS Suits by Blackrock, Royal Park Investments, and Phoenix Light

On June 1, 2015, Judge Shira Scheindlin of the United States District Court for the Southern District of New York issued a Decision and Order granting in part and denying in part HSBC Bank USA, National Association’s (“HSBC”) motion to dismiss three related actions brought by BlackRock, Royal Park Investments SA/NV, and Phoenix Light SF Ltd., claiming $34 billion in damages.  The suits allege that HSBC breached a fiduciary duty to investors as a trustee in 283 residential mortgage backed securities trusts by failing to require lenders and bond issuers to buy back loans that breached representations and warranties. Judge Scheindlin rejected HSBC’s argument that the plaintiffs had failed to plead breaches of representations and warranties on a sufficiently granular basis and also held that plaintiffs had sufficiently alleged that the bank had specific knowledge of breaches of the representations and warranties. Judge Scheindlin dismissed claims for negligent misrepresentation and negligence as time-barred.  Judge Scheindlin gave the plaintiffs 30 days to amend their complaint to attempt to cure the deficiencies in their dismissed claim.  Order.

RMBS Trustee Files New Repurchase Action Against Nomura

On September 17, HSBC Bank USA NA, as trustee for an RMBS trust, filed suit in the Supreme Court for the State of New York against Nomura Credit & Capital Inc. over approximately $613 million in RMBS issued in May 2007.  The complaint alleges that Nomura failed to repurchase securitized mortgage loans that breached representations and warranties made by Nomura concerning, among other things, the loans’ credit characteristics, origination, and compliance with applicable laws and regulations.  The lawsuit seeks Nomura’s repurchase of the allegedly defective loans or equivalent money damages.  The complaint follows the dismissal of a prior complaint in federal court that was dismissed for lack of subject matter jurisdiction.   Complaint.

Trustee Sues Deutsche Bank Over $89 Million in RMBS Securities

On January 28, HSBC Bank USA, acting in its capacity as Trustee for a single home equity loan trust, filed a complaint in the Supreme Court for the State of New York against DB Structured Products Inc., an affiliate of Deutsche Bank AG.  The Trustee alleges that Deutsche Bank breached representations and warranties regarding originator underwriting standards applied to the loans underlying the RMBS, no misrepresentation or fraud in the origination of the loans, and no material defects in the loans.  The Trustee asserts causes of action for breach of contract/specific performance, fundamental breach, and declaratory judgment for reimbursable expenses, and seeks rescissory or compensatory damages of $89 million.  Complaint.

Suit Brought Against Deutsche Bank Over $183 Million in Securitized Mortgage Loans

On September 27, HSBC Bank USA, National Association, in its capacity as trustee of ACE Securities Corp. Home Equity Loan Trust, Series 2006-HE4, filed a summons with notice of claims against Deutsche Bank Structured Products, Inc. in the Supreme Court for the State of New York, New York County.  The complaint alleges Deutsche Bank securitized $183 million in mortgage loans that did not conform to the applicable representations and warranties in its mortgage loan purchase agreement and purchase and sale agreement.  HSBC’s claims are for breach of contract and it seeks specific performance of repurchase obligations and/or damages.  Summons with Notice.