Deutsche Bank Sued by Sealink Over Mortgage Securities

Deutsche Bank AG (DBK) was sued by Sealink Funding Ltd., which accuses Germany’s largest lender of fraud over the sale of $960 million in residential mortgage-backed securities.

The suit was filed today in New York State Supreme Court by Dublin-based Sealink, a fund created to manage Landesbank Sachsen AG’s riskiest assets after it almost collapsed. The complaint accuses Deutsche Bank of misrepresenting information about loans that were pooled into 19 securities bought by Sealink in 2006 and 2007.

“Deutsche Bank originated, purchased, financed and securitized exceptionally high-risk loans into these RMBS, all while internally disparaging the poor quality of these loans and the RMBS they backed as ’pigs,’” Sealink said in a complaint, referring to residential mortgage-backed securities.

Sealink has filed similar lawsuits in the same court against Bank of America Corp., JPMorgan Chase & Co., Morgan Stanley, Royal Bank of Scotland Group Plc, Barclays Plc, Nomura Holdings Inc. and Credit Suisse Group AG in the past year. Sealink accuses them of misrepresenting the risks and characteristics of the loans underlying mortgage-backed securities.

The lawsuit “is without merit,” Renee Calabro, a New York-based spokeswoman for Frankfurt-based Deutsche Bank, said in an e-mail.

Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.

The case is Sealink Funding Ltd. v. Deutsche Bank AG, 652174/2012, New York State Supreme Court (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net