A federal judge recently allowed a lawsuit by HSBC against a Deutsche Bank affiliate over faulty mortgage-backed securities to go forward, ruling that the defendant, DB Structured Products, may be forced to repurchase bad mortgage loans from the time the securities were first issued, even before the buyers gave notice that they were defective. Southern District Judge Robert Sweet (See Profile) also ruled that DB may have to pay HSBC, which acts as trustee for the buyers of the securities, for bad loans that have already been foreclosed upon and liquidated.
Michael Shuster, of Holwell Shuster & Goldberg, who represents HSBC, said that there were close to 100 similar cases pending in state and federal courts, and the decision was a good sign for the plaintiffs in those cases. "This is the most comprehensive court decision, state or federal, that addresses all of the arguments that defendants are putting forward on motions to dismiss, and it dispenses with all of them, at the motion to dismiss stage," he said. "It's certainly not an encouraging development if you're a defendant."
