Deutsche Bank loses bid to end U.S. mortgage lawsuit
A U.S. judge on Monday rejected Deutsche Bank AG's bid to dismiss a federal regulator's lawsuit accusing it of misleading Fannie Mae and Freddie Mac into buying billions of dollars of risky mortgage debt.
U.S. District Judge Denise Cote in Manhattan said the Federal Housing Finance Agency may pursue fraud claims over some of the German bank's representations in offering materials regarding mortgage underwriting standards.
The FHFA had sued over roughly $14.2 billion of certificates that Fannie Mae and Freddie Mac, known as government-sponsored enterprises, had bought between September 2005 and October 2007.
Though the offering materials said that the representations were "preliminary" and "subject to change," Cote said their use "suggests that defendants fully intended the GSEs to rely on the representations they contained."
She dismissed some claims over representations concerning owner-occupied homes and loan values.
Deutsche Bank spokeswoman Renee Calabro declined to comment.
Last year, the FHFA filed 18 lawsuits against banks and finance companies over mortgage losses suffered by Fannie Mae and Freddie Mac on roughly $200 billion of securities.
Cote previously refused to dismiss the FHFA's lawsuits against Bank of America Corp's Merrill Lynch unit, JPMorgan Chase & Co and UBS AG .
The FHFA became the conservator of Fannie Mae and Freddie Mac after federal regulators seized the mortgage financiers on September 7, 2008.
Cote on Monday said it is premature to decide liability for activity at Deutsche Bank's MortgageIT unit that predated the January 2007 purchase of that company.
In May, Deutsche Bank agreed to pay $202.3 million to resolve a separate federal probe, in which MortgageIT admitted it had lied to the U.S. government over whether its loans were eligible for federal mortgage insurance.
The case is Federal Housing Finance Agency v. Deutsche Bank AG et al, U.S. District Court, Southern District of New York, No. 11-06192.
(Reporting By Jonathan Stempel in New York; Editing by John Wallace and Tim Dobbyn)