The Latest Episode in Bank v. Bank Litigation: Federal Home Loan Bank of Chicago Sues Dozens of Financial Institutions over $3.3 Billion in Mortgage-Backed Securities
The Chicago suit seems an awful lot like cases already filed by the Federal Home Loan Banks of Seattle and San Francisco.
By Andrew LongstrethOctober 18, 2010
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Add the Federal Home Loan Bank of Chicago to the list of parties seeking billions from the banks that sold mortgage-backed securities. On Friday, the Home Loan Bank’s lawyers at Keller Rohrback filed a Cook County, Ill., state court
complaint against dozens of financial institutions, including the largest banks in the world, over the sale of $3.3 billion in private label mortgage-backed securities, a type of residential mortgage-backed security that’s issued by private entities.
The suit follows
similar cases filed by the Federal Home Loan Bank of Seattle in December and the Federal Home Loan Bank of San Francisco in March. Like those complaints, Chicago’s case was filed in state court and does not allege fraud. (The Seattle and San Francisco cases have since been removed to federal court.) The Chicago complaint alleges that the offering documents for the mortgage pools underlying the private-label securities were inaccurate and contained critical omissions.
“It is not happenstance that the [mortgage-backed securities] failed to perform and plunged in value and were ultimately severely downgraded,” wrote lawyers at Keller Rohrback. “To the contrary, the [securities] purchased by the bank collapsed because they were not what the defendants claimed they were.”
The Chicago bank is seeking to void some of its purchases, in addition to unspecified damages. Lynn Sarko of Keller Rohrback, an attorney for the Federal Home Loan Bank of Chicago, did not return a call for comment.
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