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Trust Sues DLJ Mortgage Capital Over $1 Billion Loan Pool

Credit Suisse Group AG’s DLJ Mortgage Capital unit faces a lawsuit by a trust seeking repurchase of defective loans in a pool of more than 5,000 mortgages with an aggregate principal balance of about $1 billion.

An analysis of more than 1,500 loans in the trust found that almost 80 percent breached representations and warranties asserting that the mortgages met minimum quality standards and “complied with sound underwriting practices and applicable legal requirements,” according to the complaint.

“Given that thousands of loans were pooled in the trust, some breaches of” DLJ’s representations and warranties “could reasonably have been expected,” the trust said in the suit. “However, the sheer number of defective loans that DLJ conveyed to the trust far exceeds what was contemplated” by a pooling and serving agreement and related documents.

The suit was filed by U.S. Bank National Association, acting as trustee, in New York State Supreme Court in Manhattan on Feb. 1.

“We will vigorously defend against this latest attempt by sophisticated parties to improperly shift responsibility for alleged losses to Credit Suisse,” Drew Benson, a spokesman for Credit Suisse, said in a phone interview.

The case is Home Equity Asset Trust 2007-1 v. DLJ Mortgage Capital Inc., 650369/2013, New York State Supreme Court, New York County (Manhattan).

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