German bank Bayerische Landesbank, a subsidiary of BavernLB, slapped Goldman Sachs (GS) with a lawsuit, claiming it acquired $511.9 million in residential mortgage-backed securities from Goldman on faulty underwriting information.
By filing the suit in a New York state court, BavernLB joins a long line of disappointed RMBS investors who are seeking compensation from Goldman for misrepresenting the quality of structured financial vehicles tied to mortgages.
Goldman declined to discuss the case. But the German bank's complaint reads like many other RMBS investor suits, with the plaintiff accusing Goldman of packaging loans "it knew were of poor quality" and then shorting the financial vehicles tied to mortgages to reap profits on the deals' failure.
BavernLB claims many of the loans backing Goldman's RMBS had combined loan-to-value ratios well above the 100% threshold and debt-to-income ratios that reflected risk in terms of the borrower's ability to repay the loan.
The suit also suggests the conservative RMBS that BavernLB believed it was acquiring stemmed from the origination of loans at subprime lending firms. The multiple RMBS in question were backed by loans originated from lenders such as Countrywide Home Loans, Accredited Home Lenders, IndyMac and First Franklin Financial Corp.
BavernLB accused Goldman of common law fraud, fraudulent inducement and aiding and abetting.