U.S. Bank, a unit of U.S. Bancorp, has filed a federal lawsuit in St. Paul against two defunct subprime mortgage lenders alleging they failed to properly vet more than 3,000 loans before packaging them for sale to investors as securities.
A survey of 200 of the loan files found “material breaches” in 150 of them, “a stunning 75 percent failure rate,” the lawsuit says. The defendants are WMC Corp. and Equifirst Corp.
U.S. Bank filed a similar suit recently in New York seeking to force Bank of America Corp.’s Countrywide Financial unit to repurchase more than 4,000 loans in what originally was a $1.75 billion mortgage pool, according to Bloomberg News.
In the St. Paul case, the bank is seeking at least $200 million in damages related to $550 million in loans contained in the trust. The loans were securitized in August 2006. Wells Fargo, the trust administrator, hired Recovco Mortgage Management last year to investigate the rapidly deteriorating loans.