2nd UPDATE: Knights Of Columbus Expand BNY Mellon Mortgage Lawsuit
August 16 2011 - 5:36PM
Dow Jones News
The Knights of Columbus, an organization tied to the Roman
Catholic Church, on Tuesday raised the stakes in its fight against
Bank of New York Mellon Corp. (BK), accusing the firm of "gross
negligence" and "recklessness" in carrying out duties as a bond
trustee.
The Knights of Columbus, which hold $17 billion in assets, claim
that Bank of New York violated contractual agreements on 18
residential mortgage-backed securities issued by Bank of America
Corp.'s (BAC) Countrywide unit, including maintaining files on
underlying loans and ensuring master servicer Countrywide was
pursuing foreclosures without undue costs to investors.
The investors, led by Dallas lawyer Talcott Franklin, are asking
for unspecified damages, return of more than $500 million for the
price of their investments and relief from any future liability
because of the alleged violations by Bank of New York.
Because loan files weren't cared for, the Knights of Columbus
"did not acquire residential mortgage-backed securities, but
instead acquired securities backed by nothing at all," according to
the amended lawsuit, which was filed in New York Supreme Court.
The amended lawsuit came less than three months after the
Knights of Columbus sued to get more information on the loans in
two residential mortgage security trusts where Bank of New York is
trustee and Countrywide is servicer. The trustee is responsible for
ensuring terms of the bond contract are met, and is the first point
of action for investors.
"We are confident we have fulfilled our responsibilities as
trustee," a Bank of New York spokesman said. "The suit is without
merit and we will defend ourselves in court."
It is the latest twist in the snowballing fight by investors
against mortgage lenders and related parties that played a role in
expanding mortgage credit until the housing bubble burst.
Wall Street banks intoxicated by volume and profits eased
guidelines and waved in weaker loans that, in many instances,
violated terms of the contracts shown to investors that bought
related securities, according to the array of lawsuits and other
claims that have been weighing on financial institutions over the
past year. Investors have previously cited trustees as hurdles to
obtaining loan files, though some in the past year have become more
responsive, according to analysts.
In June, Bank of America agreed to pay $8.5 billion to settle
claims with BlackRock Inc. (BLK) and other large investors over
faulty loans and servicing violations. But some investors are
balking at the settlement, saying that the pact is unfair and that
it may interfere with attempts to pursue other claims. The Knights
of Columbus said the settlement could affect its ability to account
for the actions of Bank of America and its affiliates.
The Catholic service organization is concerned that rushed
foreclosure proceedings, known as robo-signing, have significantly
delayed the process and added to costs that lower proceeds once a
property is finally liquidated. They said the trustee has breached
its duties by not investigating robo-signing at Countrywide,
illicit foreclosures and excessive fees.
Further, Bank of New York's failure to hold loan files calls
into question the ownership of properties that have been sold after
foreclosure, adding to potential liability of the Knights of
Columbus, the lawsuit stated.
Known to some as "the strong right arm of the church," the
Knights of Columbus allege Bank of New York's actions were
"immoral, unethical, oppressive and/or unscrupulous."
-By Al Yoon, Dow Jones Newswires; 212-416-3216;
albert.yoon@dowjones.com
BlackRock (NYSE:BLK)
Historical Stock Chart
From May 2024 to Jun 2024
BlackRock (NYSE:BLK)
Historical Stock Chart
From Jun 2023 to Jun 2024