2 Eastern S&Ls; Sue Wells Fargo Over Securities
SAN FRANCISCO — Two East Coast savings and loans have filed a $222-million suit against Wells Fargo Bank for losses suffered in the purchase of mortgage-backed securities.
Riverhead Savings Bank of Long Island, N.Y., and First Federal Savings & Loan of Hammonton, N.J., filed suit Friday in U.S. District Court in San Francisco.
The banks, each of which seeks $111 million in damages, contend that San Francisco-based Wells Fargo is liable for losses because it did not disclose the contents of a letter that warned about problems in use of the properties as collateral for the certificates.
Latest to Surface
Earlier lawsuits charge that the mortgages were based on false loans and on property whose value had been inflated by a group of individuals and companies working to defraud investors.
The suit was the latest to surface in the problem-plagued sale of mortgage-backed securities to East Coast investors between 1981 and 1984. Wells Fargo and Bank of America were involved in the transaction in which other financial institutions bought notes based on packages of mortgages for homes in California, Texas and Arizona.
Bank of America bought back faulty securities last fall when it discovered the alleged fraud, but Wells Fargo has refused. Wells Fargo maintains that National Mortgage Equity Corp. is responsible because it packaged “sham” mortgages and sold them to investors, using documentation that misrepresented the true value of the property.
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