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Capital One Unit Sued for $400 Million in Mortgage Losses

Capital One Financial Corp.’s GreenPoint Mortgage Funding Inc. was sued over about $400 million in losses on mortgage-backed securities by investor trustee U.S. Bancorp.

GreenPoint mortgage loans sold to Lehman Brothers Holdings Inc. and bundled into securities were riskier than the lender represented, the trustee said in a complaint filed today in Manhattan federal court.

“This action arises out of GreenPoint’s failure to stand by its guarantees despite the defects found in the loans that it originated and then sold for hundreds of millions of dollars,” U.S. Bancorp said. The trustee wants GreenPoint to repurchase the allegedly defective loans.

Capital One, based in McLean, Virginia, shut GreenPoint in August 2007, less than a year after acquiring its parent company, Long Island’s North Fork Bancorp. A Capital One spokesman couldn’t immediately be reached for comment on the complaint.

The case is Lehman XS Trust, Series 2006-4N v. GreenPoint Mortgage Funding Inc., 13-cv-04707, U.S. District Court, Southern District of New York (Manhattan).

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