NEW YORK–A federal judge has ruled that Wells Fargo & Co must face litigation related to claims over billions of dollars of investor losses due to its role as trustee overseeing residential mortgage-backed securities (RMBS).
Among the plaintiffs is NCUA, which is seeking recoveries from investments made by five failed corporate credit unions. To date NCUA has recovered approximately $4.3 billion from various banks and other firms due to RMBS that failed during the Great Recession a decade ago.
Other plaintiffs in the suit include Black Rock, Pacific Investment Management Co. (PIMCO), Prudential Financial and TIAA-CREF.
In Manhattan, U.S. District Judge Katherine Polk Failla said the plaintiffs may pursue breach of contract and conflict of interest claims related to 53 trusts.
The judge further ruled investors may pursue some claims alleging breaches of fiduciary duty and due care, but she said she will not permit claims alleging general negligence and the violation of a New York law governing mortgage trusts.
Investors accused Wells Fargo of having taken "virtually no action" to require lenders to buy back or fix defaulted or poorly underwritten loans that backed their securities, despite knowing of shortfalls, according to Reuters.