Iron Workers Local No. 25 Pension Fund has sued Credit-Based Asset Servicing and Securitization LLC and several of its underwriters, claiming they made false statements in selling $476.4 million of mortgage-backed securities.
The lawsuit, filed in U.S. District Court in Manhattan late Friday, alleges a registration statement filed by C-Bass for a 2007 MBS offering was materially false and misleading. The lawsuit is seeking class-action status.
"The underwriting, quality control, and due diligence practices" used in making the underlying loans "were so weak that borrowers were being extended loans based on stated income … that could not possibly be reconciled with the jobs claimed on the loan application," the lawsuit said.
C-Bass is a joint venture of the mortgage insurers MGIC Investment Corp. and Radian Group Inc. The venture has been in liquidation since last year, when it sold its servicing arm, Litton Loan Servicing LP, to Goldman Sachs Group Inc.
The defendants also include units of Merrill Lynch & Co. JPMorgan Chase & Co. and ABN Amro Holding NV.
Representatives for C-Bass and ABN Amro couldn't immediately be reached for comment. Spokesmen at JPMorgan and Merrill Lynch declined comment Monday.