HSBC gets the go ahead to sue Deutsche Bank over reps and warrants

Judge denies motion to dismiss case from pre-crisis RMBS deals

A New York judge denied Deutsche Bank’s bid to dismiss four lawsuits that would force it to either pay damages or buy back subprime mortgages packaged into RMBS back before the start of the 2008 financial crisis.

Plaintiffs including HSBC claim that Deutsche Bank’s Structured Products division discovered breaches of reps and warrants and still did not repurchase.

The cases regard about concern about $2.9 billion of home loans. There are six different lawsuits against the German bank active in New York courts related to RMBS.

U.S. District Judge Alison Nathan in Manhattan said in his ruling that HSBC Holdings Plc (HSBC) is entitled to pursue damages claim.

HSBC and the trusts it represents are still, six years after the housing crisis, trying to measure how much Deutsche Bank knew about the problems with the mortgages when they were securitized.

HSBC says Deutsche Bank sold a huge amount of home loans that breached reps and warranties.

Just six months ago, Deutsche Bank agreed to pay $11.5 million to settle a Nevada Attorney General investigation into the firm’s packaging and selling of subprime and Alt-A loans.

It’s just the latest in a long line of cases involving companies heavily invested in the mass securitization of mortgages prior to the housing meltdown.

The judge’s ruling states, “Accordingly, the Court rejects Plaintiffs argument that the sole remedy provisions are inapplicable simply because it has pleaded "independent" failure-to-repurchase claims. Because such claims are not independently actionable, the question of whether Plaintiffs damages claims survive depends on whether the Agreements' sole remedy provisions are enforceable and, if they are, whether they bar damages for Plaintiffs repurchase claims.

“For the foregoing reasons, DBSP's motions to dismiss are granted in part and denied in part. Plaintiff's declaratory judgment claims, contained in the fourth causes of action in each Complaint, are DISMISSED with prejudice.”

A scheduling conference in these four actions is hereby set for April 25, 2014 at 11:30 a.m. U.S. court in New York.

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