NEW YORK, March 20 (Reuters) - Deutsche Bank AG has failed to win the dismissal of four U.S. lawsuits seeking toforce it to pay damages or buy back troubled home loans it hadpackaged into residential mortgage-backed securities prior tothe 2008 financial crisis.
The cases concern securitization trusts backed by roughly$2.9 billion of home loans, and are among six lawsuits in NewYork accusing the German bank's DB Structured Products Inc unitof reneging on its contractual duties to address problem loans,court papers show.
In a 35-page decision, U.S. District Judge Alison Nathan inManhattan on Thursday said HSBC USA NA, acting as trustee forthe four trusts, was entitled to pursue damages claims, and todetermine the extent to which Deutsche Bank knew of problems inthe underlying loans at the time of the securitizations.
Many lawsuits accusing banks that packaged mortgages intosecurities prior to the 2008 crisis of concealing loan defectsor deceiving investors about how the loans were underwritten,resulting in losses when market conditions deteriorated.
HSBC, a unit of HSBC Holdings Plc had accusedDeutsche Bank of dumping a "massive number" of home loans intothe four trusts that it knew breached its representations andwarranties, and ignoring its contractual duty to buy back, fixor substitute for the bad loans.
Deutsche Bank countered that buybacks were the only remedy,and that HSBC failed to identify which loans were covered.
It also said HSBC was suing merely at the behest of AmherstAdvisory & Management LLC, a "distressed debt" specialist thatbought the securities at deep discounts in order to pursue theclaims for breaches of representations and warranties. Amherstis not a party to the lawsuit.
In her decision, Nathan said it was premature to dismissHSBC's damages claims, saying that several courts alloweddamages when loan buybacks proved impossible, even if suchbuybacks were the "sole" contractual remedy available.
She also said HSBC was entitled to discovery to determinehow early Deutsche Bank might have been aware of problems andbecome obligated to address them.
The judge dismissed as unnecessary an HSBC request thatDeutsche Bank cover its litigation costs, saying HSBC may seekreimbursement "as part of the coercive remedy it is pursuingunder its breach of contract claims."
Deutsche Bank spokeswoman Renee Calabro and HSBC spokeswomanJuanita Gutierrez both declined to comment. Lawyers for thebanks did not immediately respond to requests for comment.
The cases, all in the U.S. District Court, Southern Districtof New York, are: ACE Securities Corp Home Equity Loan Trust,Series 2007-HE3, by HSBA Bank USA NA as Trustee v. DB StructuredProducts Inc, No. 13-1869; Series 2007-WM2, No. 13-2053; Series2007-HE4, No. 13-2828; and Series 2007-HE5, No. 13-3687. (Reporting by Jonathan Stempel in New York; Editing by RichardChang)
HSBC Holdings (HSBA)