U.S. banks exported billions of dollars of mortgage-backed securities losses to their peers in Germany and elsewhere in Europe before the housing collapse. Now those overseas institutions may join the effort to put back some of the losses.

A legal clearing house for restive MBS holders says German banks have recently been enlisting. The claim is hard to verify, but cannot be dismissed solely as the hopeful chatter of lawyers and activist investors.

Representatives of sizable German banks have spoken of their interest in pursuing compensation for private residential MBS losses, and one European financial institution with MBS holdings confirmed to American Banker that it and others are looking to act.

"The pressure is to take a more proactive stance," a representative of the institution said. "Out of desperation, a lack of alternatives you could say, they are actively pursuing this road."

If brought to fruition, the effort could change the landscape for investor disputes. Though hundreds of billions of dollars in securitized mortgages are held overseas, few foreign bondholders have made much noise to date.

The arrival of fresh investors without major Wall Street relationships could provide a crucial boost for private-investor mass litigation. Aside from any international pressure that European banks might be able to lever, the U.S. members of the clearing house would benefit because recruiting members brings funding and enhanced court standing.

The bank representative attributed the movement partly to European regulators' demand that banks address losses in their securities portfolios.

There is also political pressure. At least some of the securities are in the hands of institutions bailed out by the German government, injecting taxpayer money into the situation. The ultimate size of European private-label mortgage-backed securities holdings is unknown.

As reported by Handelsblatt, a German business paper that was the first to write about the prospects of German investor action, Germany's minority party has maneuvered to force banks to disclose their structured finance losses.

After multiple delays, the results are scheduled for release the week of Jan. 17 and could pose a dilemma for the banks: while they have been reluctant to disclose their subprime debt losses, inaction could be embarrassing.

"Within the last month, we've had a large number of clients from Europe sign on, and interest continues to build," said Tal Franklin, a Dallas attorney organizing the principal investor clearing house. "Many of them are only just now learning about some of the egregious practices that happened over here."

The movement that has occurred on the issue has not been entirely organic.

It is the result at least in part of an attempt by activist American investors to drum up allies, with Greenwich Financial Services in a leading role.

The fund's chief executive, Bill Frey, has been a fixture in the German press over the past few months, reminding the public of German banks' losses and promoting the investor clearing house as an international push on which the nation's banks might miss out.

Billed as a Wall Street insider who has turned against the banks, he was recently the subject of a lengthy, admiring profile in Die Zeit, a major-circulation weekly newspaper.

In an e-mail to American Banker, Frey portrayed the clearing house as the best option to address the mishandling of European banks' investments.

"They are aware that without concerted action, they will have no legal standing and will suffer greater losses on their positions," he said.

Frey has also argued that displeasure abroad with U.S. banks should become a diplomatic issue.

"Foreign banks and foreign wealth funds are affected by the actions of the U.S. regulators and the U.S. banks," he wrote. "Improper behavior of large U.S. banks can affect these external international relationships."

Even in the U.S., private-label investor movement has been somewhat muted.

Though Bank of America Corp. has reported that it is in discussions with a select group of the largest bondholders, it and other large banks have repeatedly dismissed the validity of private-investor claims and plaintiffs' capacity to pursue them in court.

Unlike U.S. MBS holders who are reliant on the major investment banks for funding and trade-execution services, the representative of a European institution said, many of the foreign institutions maintain a low international profile.

Ironically, the limited ties to Wall Street that made German banks the less-than-savvy buyers of late-vintage subprime securities could make them less afraid to challenge the major broker-dealers.

"The banks that are more local in nature, returning back to core markets — they would be more likely to pursue this kind of option," the bank representative said. "They don't care if they piss off the investment banks."

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