FHLB Boston In New Suit Over Failed MBS
BOSTON – The Federal Home Loan Bank of Boston, still digging out from tens of millions of dollars of losses on its private label mortgage-backed securities, filed suit this week against Wall Street underwriters of the faulty securities, the sixth FHLB to take its MBS case to court.
The suit comes as NCUA is negotiating with and has threatened to sue several Wall Street firms who sold billions in faulty MBS to the five failed corporate credit unions. NCUA is asking the Wall Street firms to buy back as much as $50 billion in MBS the firms sold to the five corporates, which caused them to fail.
In its suit in Suffolk Superior Court, the Boston FHLB, which is owned by banks and credit unions, has asked the court to order the Wall Street banks to buy back $5.8 billion of failed MBS. The FHLB lleged it was given untrue or misleading statements in the sale of the securities. Securities documents allegedly contained misrepresentations, omissions and unfair or deceptive trade practices. The bank also claimed fraud on the part of the ratings agencies.
"The Bank is seeking various forms of relief including rescission, recovery of damages, recovery of purchase consideration plus interest (less income received to date) and recovery of reasonable attorneys' fees and costs of suit," the suit says.
The FHLBs in San Francisco, Chicago, Pittsburgh, Seattle and Indianapolis have also filed suits over failed MBS.