SunTrust Banks, Inc.
Capital One Financial Corp.
) were sued by an affiliate of ResCap - the redundant mortgage
company of Ally Financial. The affiliate of ResCap, Residential
Funding Co. filed a lawsuit, which demanded that the
above-mentioned banks buy back the allegedly faulty loans pooled
into mortgages bonds.
A complaint was filed in New York State Supreme Court in
Manhattan against UBS Real Estate Securities Inc. - a unit of UBS
AG. The plaintiff alleged that almost 44% of the $460 million
worth of loans it bought from UBS were faulty, and as a result
Complaints against SunTrust and GreenPoint Mortgage Funding Inc.
(an affiliate of Capital One that was closed down in 2007) were
filed in a federal court in Manhattan. Residential Funding seeks
damages against almost $3 billion in loans from SunTrust Mortgage
and millions of dollars worth of mortgages from GreenPoint.
The lawsuits accuse the banks of breach of contract and claim
that they sold mortgage loans to Residential Funding that did not
conform to its quality-standards. Further, the lawsuit alleged
that erroneous documentation, fraud by borrowers, or deceptive
and inflated appraisals prevented Residential Funding from
understanding the flawed nature of the loans.
ResCap had serviced more than $374 billion in U.S. residential
mortgage loans before declaring bankruptcy in May 2012 to address
towering mortgage liabilities. Recently, it was granted court
approval for a liquidation plan that resolves more than $100
billion in potential lawsuits, putting the mortgage lender on
track to end its bankruptcy before the end of 2013.
Major U.S. banks such as
JPMorgan Chase & Co.
) are facing a wave of lawsuits, which charge them of selling
substandard mortgage securities during the financial crisis.
These have added to the legal woes of banks in recent times.
Though these lawsuits could tarnish the image of the banks,
investors and financial institutions that suffered due to these
faulty practices, are expected to be fairly compensated.
While UBS AG currently carries a Zacks Rank #4 (Sell), both
SunTrust and Capital One have a Zacks Rank #3 (Hold).
CITIGROUP INC (C): Free Stock Analysis Report
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SUNTRUST BKS (STI): Free Stock Analysis
UBS AG (UBS): Free Stock Analysis Report
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