Chase named in Schwab mortgage-backed security suit
NEW YORK (Dow Jones)–Charles Schwab Corp. (SCHW) is suing units of three banks over the sale of mortgage-backed securities to the company’s bank, alleging the firms made false statements or omitted facts about the credit quality of loans that backed the investments.
The banks named in the complaint filed on June 29 include units of Bank of America Corp. (BAC), UBS AG (UBS), and J.P. Morgan Chase & Co. (JPM). Two units of Wells Fargo & Co. (WFC) are also named in documents, though the bank wasn’t one of the securities dealers that sold certificates to Schwab. Rather, Wells Fargo is considered an issuer of the certificate that UBS sold to Schwab.
In a filing with Superior Court of California, County of San Francisco, Schwab said it purchased three certificates in three securitization trusts backed by residential mortgage loans for $130 million.
Schwab alleges that defendants in the suit “made untrue statements, or omitted important information, about such material facts as the loan-to-value ratios of the mortgage loans, the number of borrowers who did not live in the houses that secured the loans and the extent to which the entities that made the loans departed from their standards in doing so.”
The complaint alleges that more mortgage loans other than those listed in the document “were the subject of untrue or misleading statements.”
The complaint says that because the certificates are securities, under two California securities acts, Schwab believes it is entitled to rescind the purchase of the certificates or be paid damages for losses on the certificates.
Bad bad Chase, Lawsuits | admin July 14, 2010
