Credit Suisse Group AG (ADR) (NYSE:CS) is facing new legal trouble relating to mortgage-backed securities issued in 2006 and 2007, according to a report yesterday in the Financial Times. The article claims the state of New Jersey filed a lawsuit against the bank today.
The Swiss financial institution agreed to pay a $120 million fine to the SEC relating to its mortgage sales practices in 2012. Credit Suisse Group AG (ADR) (NYSE:CS) is also facing a similar lawsuit from the state of New York as well as a number of private lawsuits.
Details of the lawsuit
John J. Hoffman, the acting attorney-general of New Jersey, filed a lawsuit today alleging that the mortgage-backed derivatives sold in 2006 and 2007 were guaranteed by home loans that didn’t even meet the bank’s own underwriting guidelines.
The suit further alleges that Credit Suisse Group AG (ADR) (NYSE:CS) failed to disclose that around a quarter of the home loans packaged into the mortgage securities were already underwater at the time of sale, and that in a number of cases, CS traders refused to hold those loans on their own books.
The suit also claims that Credit Suisse Group AG (ADR) (NYSE:CS) is acting illegally in not passing on tens of million of dollars in reimbursements it has received over the last several years from loan originators relating to the delinquent loans.
The New Jersey AG’s office said the decision to file the suit was related to evidence gathered by the Department of Justice’s and the state working group’s investigation into bank mortgage sales practices. The working group is reportedly still investigating 16 financial institutions regarding improper mortgage sales.
Credit Suisse statement
A statement from Credit Suisse Group AG (ADR) (NYSE:CS) said it planned to contest the baseless allegations: “This complaint is without merit. It recycles baseless claims and uses inaccurate and exaggerated figures.”