U.S. District Judge Judge Gregory Woods in Manhattan says that Bank of New York Mellon Corp. (BK) must face a residential mortgage-backed securities fraud lawsuit holding the bank liable for $1.12B of investor losses. Royal Park Investments SA\/NV, which is a Belgian investment fund, may now proceed with its claims, including those alleging breach of trust, breach of contract, and Federal Trust Indenture Act violations. <\/p>\n
In its case against BNY Mellon, Royal Park wants class action status for other investors. It claims that its RMBS in the trusts at issue are now \u201c\u201dcompletely worthless.\u201d <\/p>\n
The investment fund contends that BNY Mellon, in its role of trustee for five trusts, disregarded the abuse occurring in the way the underlying loans were serviced and underwritten and did not mandate that bad loans be bought back. Royal Park believes that BNY Mellon breached its obligations out of fear it would lose business or make other financial service companies angry. <\/p>\n
Over the past year, the investment fund has been allowed to pursue similar cases against HSBC Holdings Plc. (HSBC) And Deutsche Bank AG (DB). In the investment fund\u2019s case against Deutsche Bank. U.S. District Judge Alison J. Nathan in New York recently denied the bank\u2019s bid to get the proposed class action over $3.1B in RMBS losses dismissed. She did, however, dismiss derivative claims. Royal Park claims that Deutsche Bank knew by April 2011 that loans involved were highly defective but refused to force loan sellers to buy back the loans or replace them when it became clear that the mortgages backing the bonds were defaulting. Nathan also said that the plaintiffs detailed claims of significant losses, high default rates, and widespread probes into RMBS securitization were sufficient that the court was able to draw \u201creasonable inference\u201d that loan guarantees had been breached. <\/p>\n
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