Bank of America Corp. and U.S. Bancorp were sued by a pension fund that accused the banks of failing to fulfill their obligations to protect investors in mortgage-backed securities.
The banks “regularly disregarded” their responsibilities as trustee for Washington Mutual Inc. mortgage bonds and caused millions of dollars in losses for investors, the Policemen’s Annuity and Benefit Fund of the City of Chicago said in a complaint filed yesterday in federal court in Manhattan.
The banks knew that loans backing the securities didn’t live up to their promised quality, that mortgage loan files were incomplete, and failed to take action to enforce WaMu’s obligation to repurchase defective loans, according to the complaint.
Lawrence Grayson, a Bank of America spokesman, declined comment on the complaint. Teri Charest, a U.S. Bancorp spokeswoman, said the Minneapolis-based bank would fight the allegations. U.S. Bancorp succeeded Bank of America as trustee for the trusts at issue, according to the court filing.
“The complaint contains numerous misstatements and mischaracterizations of U.S. Bank’s role as trustee,” Charest said in an emailed statement.
The case is Policemen’s Annuity and Benefit Fund of the City of Chicago v. Bank of America NA, 12-2865, U.S. District Court, Southern District of New York (Manhattan).