Deutsche Bank Unit Sued by FHFA Over Mortgage Securities

A Deutsche Bank AG unit was sued by the Federal Housing Finance Agency, which seeks the repurchase of loans backing mortgage securities.

DB Structured Products Inc. breached promises about loans that were pooled and securitized and failed to repurchase them as required, the FHFA said in a filing today in New York State Supreme Court in Manhattan.

The FHFA oversees mortgage-finance companies Fannie Mae and Freddie Mac. Deutsche Bank was among 17 financial institutions the agency sued over mortgage securities last year, saying loans backing the bonds were riskier than promised. That complaint against Deutsche Bank involves $14.2 billion in mortgage bonds, according to court papers.

FHFA didn’t disclose in its court filing today the size of the investment at issue in the state court case. The securities were issued by ACE Securities Corp. Home Equity Loan Trust, Series 2006-FM1, according to the filing.

“Deutsche Bank has acted appropriately in response to legitimate repurchase demands,” Renee Calabro, spokeswoman for the Frankfurt-based lender, said in a statement. “These suits are based on brazen factual assumptions and unsupported legal theories. We are prepared to vigorously defend against each of them.”

Freedom Trust

Separately, DB Structured Products was sued by Freedom Trust 2011-2 over mortgage securities, according to a filing today in New York State Supreme Court. As in the FHFA case, DB Structured Products is accused of breaching promises about the quality of loans.

Breaches of so-called representation and warranties “may be pervasive and systemic across the loan pool,” Freedom Trust said. It seeks about $567 million, according to the filing.

The cases are Federal Housing Finance Agency v. DB Structured Products Inc., 652978-2012; Freedom Trust 2011-2 v. DB Structured Products Inc., 652985-2012, New York State Supreme Court (Manhattan).

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