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Bank of New York Mellon Corp/The
Bank of America Corp
Bank of New York Mellon Corp. (BK) must face claims by pension funds that sued the bank over its role as trustee for mortgage-bond investors, alleging it caused billions of dollars in damages.
U.S. District Judge William Pauley in Manhattan dismissed some of the claims raised in the lawsuit filed against the bank last year and said others would proceed, according to a decision filed today.
BNY Mellon disregarded its duties as trustee for investors in Countrywide Financial Corp. mortgage bonds, according to the complaint brought by a group of pension funds, including City of Grand Rapids General Retirement System and the Retirement Board of the Policemen’s Annuity and Benefit Fund of the City of Chicago.
The bank failed to review loan files for mortgages that backed its securities to ensure there were no missing or defective documents, the funds said. BNY Mellon also failed to act on behalf of investors to make sure that loans with “irregularities” were removed from the pools of mortgages, according to the complaint.
The bank caused bondholders to suffer billions of dollars in damages and created “considerable uncertainty” regarding investors’ ownership interest in the mortgage loans backing their securities, the funds said.
BNY Mellon spokesman Kevin Heine said the bank would defend against the remaining claims.
“We are pleased that the court substantially narrowed the issues to be considered and removed the vast majority of trusts from this action,” he said in an e-mail. Pauley dismissed claims related to trusts in which the plaintiffs never invested.
The decision comes as BNY Mellon is seeking court approval for an $8.5 billion settlement with Bank of America Corp. (BAC) that would resolve claims from investors in Countrywide mortgage bonds. Charlotte, North Carolina-based Bank of America acquired Countrywide in 2008.
Beth Kaswan, an attorney for the pension funds, didn’t respond to an e-mail seeking comment on the ruling.
The case is Retirement Board of the Policemen’s Annuity and Benefit Fund of the City of Chicago v. Bank of New York Mellon, 11-5459, U.S. District Court Southern District of New York (Manhattan).
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