German bank HSH Nordbank filed separate lawsuits against Goldman Sachs (GS) and Morgan Stanley (MS) this week, alleging the banks sold more than $634 million in mortgage-backed securities collateralized by risky home loans.
The first suit was levied against investment bank Goldman Sachs in the Supreme Court of the State of New York.
In that case, HSH Nordbank claims the investment bank and its subsidiaries packaged and sold $110.5 million in mortgage-backed securities without disclosing the true quality of the underlying loans.
The international bank is now seeking damages or rescissions to recover its losses.
“The offering materials (on the securities) also contained material misrepresentations and omissions regarding key statistical characteristics of the mortgage loans underlying the securities, including the loans’ loan-to-value ratios and combined LTV ratios, as well as the percentage of owner-occupied properties,” HSH Nordbank claimed in the Goldman Suit.
As plaintiff, HSH Nordbank accused Goldman and various subsidiaries of fraud, fraudulent inducement, negligent misrepresentation and aiding and abetting fraud.
Furthermore, HSH filed suit against Morgan Stanley, claiming the investment bank packaged and sold $523.9 million in MBS that contained poorly performing loans mischaracterized at the time of sale.
The bank claims offering materials from Morgan Stanley did not disclose the true loan-to-value ratios and, in some cases, made misrepresentations about the percentage of owner-occupied properties.
HSH Nordbank also claims the materials offered included misrepresentations about the securities’ credit ratings.