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BofA & U.S. Bancorp Win Dismissal of 3 RMBS Lawsuits - Analyst Blog

Zacks Equity Research
Updated

In a major relief to U.S. Bancorp USB and Bank of America Corporation BAC, the U.S. District Judge in Manhattan dismissed three lawsuits. The cases pertained to the allegations that banks failed to perform their duties as trustees for residential mortgage-backed securities (“RMBS”).

The U.S. District Judge Katherine B. Forrest presided over all three cases. In one of the lawsuits, U.S. Bancorp was accused of failure to give written notice of breach of mortgage loan representations as a trustee of 843 RMBS trusts. The underlying loans were worth $778.6 billion.

U.S. Bancorp was sued by funds from BlackRock Inc. BLK, Allianz SE’s AZSEY Pacific Investment Management Co and TIAA-CREF. While dismissing the lawsuit, Forrest ruled that each of the trusts were subject to the governing documents for different groups of loans.

In another case, the National Credit Union Administration (“NCUA”) – the credit union regulator –sued BofA and U.S. Bancorp for 74 RMBS trusts which 5 corporate credit unions (that later on failed) had purchased. While rejecting the case, Forrest stated that since NCUA had re-securitized the certificates, the credit union regulator cannot pursue the lawsuit.

In the third lawsuit, Forrest threw out the claims made by many Ireland- and Cayman Islands-based companies against U.S. Bancorp and BofA as the plaintiffs lacked standing.

Nevertheless, the judge permitted all plaintiffs to re-file some of their claims.

We believe dismissal of lawsuits will act as a major moral boost for BofA and U.S. Bancorp. Lately, the Wall Street biggies have been facing several cases and claims over similar issues. These have adversely impacted their financials as well. Notably, since plaintiffs have been granted permission to re-file some of the claims, we expect that BofA and U.S. Bancorp would be fully reserved to mitigate the effects of such cases.

Currently, both BofA and U.S. Bancorp carry a Zacks Rank #3 (Hold).

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US BANCORP (USB): Free Stock Analysis Report
 
BLACKROCK INC (BLK): Free Stock Analysis Report
 
BANK OF AMER CP (BAC): Free Stock Analysis Report
 
ALLIANZ AG-ADR (AZSEY): Free Stock Analysis Report
 
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Zacks Investment Research