Goldman Sachs Group Inc. (GS:US) and Deutsche Bank AG (DBK) failed to persuade a judge to throw out lawsuits by the Federal Housing Finance Agency over alleged misconduct in the sale of mortgage-backed securities.
U.S. District Judge Denise Cote in Manhattan denied requests by the banks to dismiss the suits, while rejecting some claims against them, according to filings today. The FHFA is the conservator for the U.S. government-sponsored housing enterprises Fannie Mae (FNMA:US) and Freddie Mac.
“The facts alleged in the amended complaint are sufficient to plead fraud with respect to the offering material’s representations regarding mortgage underwriting standards,” Cote said in the opinions on Deutsche Bank and Goldman Sachs.
The federal court is considering 16 suits by the agency against banks over the sale of mortgage-backed securities purchased by Fannie Mae and Freddie Mac from 2005 to 2007. Cote on Nov. 8 denied a motion by Bank of America Corp. (BAC:US)’s Merrill Lynch unit to dismiss the agency’s suit against it.
A trial in the cases against Deutsche Bank and Goldman Sachs is set to begin in September 2014, according to today’s filings.
Deutsche Bank, based in Frankfurt, declined to comment on the ruling, spokeswoman Renee Calabro said in an e-mail. Michael DuVally, a spokesman for New York-based Goldman Sachs also declined to comment, in a phone interview.
The fraud claims dismissed by the judge in each case relate to loan-to-value ratios and owner-occupancy reporting.
The cases are Federal Housing Finance Agency v. Deutsche Bank, 11-6192, and Federal Housing Finance Agency v. Goldman Sachs, 11=6198, U.S. District Court, Southern District of New York (Manhattan).
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